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Fed's historic rate hike

Wednesday, December 16, 2015 - 01:47

The U.S. central bank raised interest rates by a quarter of a percentage point. It was the first hike in nine years. Bobbi Rebell reports.

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The Federal Reserve raised interest rates by a quarter of a percentage point, the first hike in nine years, and a big signal that the central bank believes the economy is strong enough to merit the change in policy. Chair Janet Yellen explained the timing: SOUNDBITE: JANET YELLEN, CHAIR, FEDERAL RESERVE (ENGLISH) SAYING: "It takes time for monetary policy actions to affect future economic outcomes. Were the FOMC to delay the start of policy normalization for too long, we would, likely, end up having to tighten policy relatively abruptly at some point to keep the economy from overheating and inflation from significantly overshooting our objective. Such an abrupt tightening could increase the risk of pushing the economy into recession." The statement was perceived as dove-ish - twice using the term "gradual" - to signal policy makers were in no rush to dramatically raise future rates quickly. SOUNDBITE: JANET YELLEN, CHAIR, FEDERAL RESERVE (ENGLISH) SAYING: "Monetary policy remains accommodative. We've indicated that we'll be watching what happens very carefully in the economy." Yellen said policy makers were confident that inflation would reach their two percent target in the medium term. But she said the Fed did not have to reach that goal to raise rates again. The stock markets moved higher in reaction to the move. IHS Chief Global Economist Nariman Behravesh: SOUNDBITE: NARIMAN BEHRAVESH, CHIEF GLOBAL ECONOMIST, IHS (ENGLISH) SAYING: "They had sort of pre-annouced this hike. Everybody talked about it. Everybody had given speeches about it, that is to say, the Fed officials. So, it's almost like if they didn't do it they would lose credibility. So, I think, they want to get this out of the way, and, then, from now on, I think, they are going to proceed very carefully, very slowly." Fed policymakers next meet January 26th.

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Fed's historic rate hike

Wednesday, December 16, 2015 - 01:47