The US Federal Reserve raised interest rates in the country by 25 basis points to 0.5-0.75%. Moreover, the institution signaled a more aggressive policy next year. In its statement, the US Federal Reserve said that expect stabilization of the labor market in the future. The inflation in the US is growing significantly.
“We recognize the significant progress that make the economy with respect to our objectives – maximum employment and price stability”, said the Fed governor, Janet Yellen.
In 2017, the Federal Reserve, which acts as a central bank of the United States, will have three increases in interest rates instead of the expected two. Reason for this are the promises of the newly elected US president Donald Trump to support the economy by cutting taxes, increasing costs and limiting regulations.
Despite the expectations, the US Federal Reserve decided to raise interest only in in its last meeting for the year. All indicators that the institution traces, recorded good performance in 2016. The unemployment fell to 4.6%. Only in November in the US have created new 178,000 jobs. The inflation also rose, and more expensive fuels also suggest additional pressure on prices in the future.
Yellen forecast is that inflation will grow and will reach the 2% over the next few years.
The consumer and business confidence in the US grow and consumers and companies are optimistic about the development of the US economy after the election of Donald Trump for president
Immediately after the announcement of the Federal Reserve in the US stock markets sank.
Analysts expected that Dow Jones may surpass the psychological barrier of 20,000 points. The blue chip index, however, lost almost 0.4% to 18,838.49 points. Broad S&P 500 also lost ground and declined by 0.5% to 2,260.87 points. The Nasdaq moves the red territory with a decline of 0.4% to 5,442.3 points.
However, the primary shock probably will be compensated in the further hours of the trade.
Fed raises interest rate for the first time since December 2015 and a second time after the crisis of 2007-2009 year. In the crisis years the institution maintained the interest rate at a level of almost zero and activates a large-scale program for the purchase of “toxic” assets to stabilize the economy.
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