As Expected Fed Raises Interest Rates For First Time In More Than Nine Years

Washington (Dec 16)  In line with heightened expectations, the Federal Reserve has raised interest rates by 25 basis points, bringing the Fed Funds rate to a range between 0.50% and 0.25%.

This is the first time the U.S. central bank has hiked rates since June 2006; the move was almost universally expected by economists and market participants.

The historic rate hike comes as the committee appears to be more optimistic on the U.S. labor market, noting that continued improvement "confirms that underutilization of labor resources has diminished appreciably since early this year."

The committee's economic outlook in the statement was relatively unchanged from October as the central bank sees the country's economic activity expanding at a "moderate pace."

"Overall, taking into account domestic and international developments, the Committee sees the risks to the outlook for both economic activity and the labor market as balanced," the statement said.

Although the Fed has embarked on a new rate-hike cycle, the committee has provided no further guidance on the next expected rate hike.

"The Committee expects that economic conditions will evolve in a manner that will warrant only gradual increases in the federal funds rate; the federal funds rate is likely to remain, for some time, below levels that are expected to prevail in the longer run. However, the actual path of the federal funds rate will depend on the economic outlook as informed by incoming data," the statement said.

Source: KitcoNews