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US Federal Reserve raises interest rates

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Core Tip:he US Federal Reserve has raised interest rates for the first time since 2006.

The US Federal Reserve has raised interest rates for the first time since 2006.


The Fed raised rates by 0.25 percentage points, meaning the rate at which lend to each other overnight is between 0.25% and 0.5%. It could also make some loans slightly more expensive for businesses and consumers.

Interest rates have been at zero since since 2008.

The move is likely to put pressure on major western central banks to follow suit and raise interest rates. There is already pressure on the Bank of England to raise rates from some organisations and economists, but it says an increase isn’t likely until the second half of next year.

The increase will also strengthen the dollar against other currencies, and is expected to make it more expensive for developing economies, which are already seeing slowing growth, to borrow – a move that is likely compound that reduced growth.

In a statement, the Fed’s rate-setting committee said: “The committee judges that there has been considerable improvements in labor market conditions this year, and it is reasonably confident that inflation will rise, over the medium term, to its 2% objective.”

Despite the likelihood of increased pressure on the Bank of England, business lobby group the CBI says the time is not right for a UK rise. Rain Newton-Smith, the CBI ‘s director of economics, said: “Alongside the US, the UK has been one of the best-performing advanced economies in recent years, but the Bank of England probably still has a way to go before rising inflationary pressures at home persuade it to follow and up interest rates.”

 

 

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