Smart Borrower Blog

Federal Reserve Raises Rates to 8-Year High


Mar 15th, 2017 @ 12:41 PM by Amber Nelson


The Federal Open Market Committee – an arm of the Federal Reserve – raised its target interest rate today, the second increase in three months, with the rate now barely back up where it was eight years ago at the end of 2008.

The Fed upped its federal funds rate to the range of 0.75 percent to 1.0 percent, up a quarter percentage point from the last meeting. “Our decision …reflects the economy’s continued progress toward the employment and price stability objectives,” Fed President Janet Yellen said in a statement.  She also later told reporters, “the simple message is — the economy is doing well. The unemployment rate has moved way down and many more people are feeling more optimistic about their labor prospects.”

The U.S. economy has added on average 200,000 jobs per month over the last three months, with the unemployment rate being pushed down to 4.7 percent in February. “Looking ahead, we expect that job conditions will strengthen somewhat further,” Yellen added.

Inflation is also on the rise, climbing to nearly 2 percent in January as energy prices have grown. The Federal Reserve’s purpose is to keep inflation in check while encouraging a low unemployment rate.

Even though today’s rate is still extremely low by historical standards it will have an effect on the broader economy. Rates on everything from mortgages to credit cards to car loans are likely to rise immediately. Bank savings accounts rates and c.d. rates should also get a bump.

The Fed expects to increase its rates two more times over the course of this year and three time in 2018.

About Amber Nelson
Amber Nelson is a seasoned mortgage industry writer and a regular contributor to Loan.com and Mortgage101.com.

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