The interest rates are finally going to be moving again after nearly 10 years of being at historical low numbers as the Federal Reserve okayed the rate hike at the December meeting. The key interest rate was raised for the first time since 2006 on Wednesday, which went from 0 to .25 percent up to .25 percent to .5 percent. This was a move a long time in the making, and not a move that was a surprise to people who have been following the good economic news over the past few months.
When you look at the key interest rate hike, you can see that it was not a very big rate hike at all, but it still is going to impact millions of Americans from various backgrounds. Home buyers, savers, and investors are just some of the people who will see the impact of the interest rate hike. In terms of the savers out there, they will see some more interest on their bank deposits, although the bigger banks did not make any increases in their interest rates on Wednesday. People also will see that their mortgage rates will rise as well, but this will be a gradual process.
Interest Rates Hike Significance
The key interest rate hike was very much an expected move this month, as the November jobs report and unemployment numbers were all indicating that the economy was growing and jobs were becoming more available. The economy has healed quite a bit since the Great Recession, and the Central Bank is now under the belief that the American economy has grown and become stronger.
This is all good news because that means that the economy does not need to be held up by crutches such as the emergency regulations that were put into place during the economic collapse. The historically low interest rates were part of the crutches that were used to help boost the economy after the Great Recession.
During a press conference, Federal Reserve Chairwoman, Janet Yellen, said that she felt very confident about the fundamentals that were now driving the economy. She said that the domestic spending and the health of households in America were all going well, feeling confident about things, although she did have a few concerns. Yellen said that manufacturing and the energy sector were two areas of the economy that were still facing pressures, but overall the health of the economy was sound.
The Federal Reserve did say that there will be future rate increases, but it will be a gradual process, which is designed to make sure that these rate increases do not hinder the economic recovery. The statement from the Central Bank went on to say that the economy will merit only “gradual increases” in rates, and this means that a lot of rates are going to still be very low for a long period of time.
Yellen made sure to repeat the word gradual quite a few times during her press conference and during the statement, and this gradual process is something a lot of economic experts had predicted as previous statements also used the word slow and gradual often.
After Yellen made the announcement that the interest rates would indeed be going up, the Dow went up 224 points on the news. A lot of investors were happy because of how Yellen made sure to say that gradual increases were how things would be going down in the future and things would be gradual into next year as well. The Federal Reserve also made sure to say that financial and international developments would be taken into consideration before interest rates went up.
This is also a good sign for investors because a lot of them were worried that moving too quickly with the interest rate hikes would cause instability both in America and abroad, and were glad to see that any developments would be considered before more rate hikes happened next year. At this point in time it appears that interest rates are going to be moving gradually in 2016, with a lot of people now satisfied with the approach to the interest rate hike.