Fed Raises Key Interest Rate By 0.25 Percent

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Three or more rate hikes are expected to occur in 2017

December 14, 2016

Marriner S. Eccles Federal Reserve Board Building. Photo: ctj71081/Creative Commons

The Federal Reserve increased its key interest rate by 0.25 percent on Wednesday, confirming what financial and housing experts have been anticipating for months.

CNN Money reports that the rate increase signifies the Fed’s confidence in the U.S. economy. It is only the second rate hike in a decade, and the first since last December.

Buyers, savers, and investors will have to get used to more frequent increases. Fed officials anticipate three or more rate hikes in 2017. But, this is far from a certainty: The Fed was projected to raise the rate four times in 2016, but various setbacks led to only one rate hike.

The rate increase indicates that the U.S. economy no longer needs the Fed's crutches and consumers and businesses can afford to pay more to borrow. America has added jobs for 74 consecutive months and the country's unemployment rate has fallen to 4.6%, its lowest level since 2007. The U.S. economy has expanded for seven years, even though the pace of growth has been slow.

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