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Fed expected to hike by 25 basis points
Federal Reserve policymakers are expected to raise the key interest rate for the first time in nearly ten years on Wednesday, ending months of speculation.
Fed Chairwoman Janet L. Yellen and her colleagues would be sending a symbolically powerful signal that they believe the economy finally has recovered enough from the Great Recession to start reversing seven years of holding the central bank’s benchmark short-term interest rate near zero.
The increase in the so-called federal funds rate is likely to be minuscule: just 0.25 percentage point. The next similarly small move probably would not come until March or even June. The last time the Fed began a period of rate boosts was in 2004, when it made a similar 25 basis point move. It increased rates 16 more times over the next two years.
The US central bank is due at 19:00 GMT to deliver its monetary policy decision, followed half an hour later by a press conference from chair Janet Yellen.
US monetary policy has global importance because it sets the short-term borrowing costs for the world’s biggest economy and provides a benchmark off which many financial assets are valued.
The federal funds rate applies to short-term lending between banks from the reserves they hold at the Fed. But the rate affects other borrowing costs and has become a benchmark for savings accounts, certificates of deposit, credit cards, auto loans, small business loans and home equity lines of credit.
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