Federal reserve raises interest rates: Here’s what that means to you

But the central bank has tested other tools to help it achieve the increases it wants in the funds rate. “A range of recent labor market indicators, including ongoing job gains and declining unemployment, shows further improvement and confirms that underutilization of labor resources has diminished appreciably since early this year”, the FOMC said. And the Fed made clear it will assess the economy’s health before raising rates further.

Also, Americans with adjustable-rate mortgages will probably face a higher rate at the date of their next adjustment.

While conditions don’t yet demand an increase here, persistently low rates add to the debt problem in an already unbalanced economy. But what does the Federal Reserve’s decision to raise interest rates actually mean for your wallet? The rate hike though a small one, is seen as a sign of how much the USA economy has healed since the 2007-2008 financial crisis.

With inflation now still low, why is the committee raising the federal funds rate target? The “actual path of the federal funds rate will depend on the economic outlook as informed by incoming data”, Fed officials said in a statement. And the Fed’s first hike may not slow them.

In fact, longer term interest rates-after an initial bit of volatility-barely budged following the Fed’s announcement today.

They have recovered from near six-year lows this month, however, as attention switched from the timing of the first hike to the potentially slow pace of future increases.

The projections of Fed members for their expectations of rate policy to come – known as the “dot plot” by Fed watchers – suggests the Fed is assuming four more modest rate hikes in 2016 to bring the rate to 1.375 per cent, followed by four more in 2017 to bring the rate to 2.375 per cent.

But if hiring stays at a healthy pace and prices rise as consumers spend more, then the Fed seemed to indicate that it would raise rates more quickly.

It’s important to remember that interest rates remain extremely low, even after the rate hike. And the unanimous Fed statement said as much. More specifically, the central bank will continue to assess both realized and expected economic conditions relative to its objectives of maximum employment and 2-percent inflation.

Sanders released a statement after the Fed announced on Wednesday that it would raise rates for the first time since 2006, saying the decision would stunt economic growth and hurt families who still have not entirely recovered from the effects of the recession. Sanders – one of former Fed Chair Ben Bernanke’s least favorite politicians – is tapping into sentiment that the country has yet to fully escape the clutches of a recession that officially ended six years ago.

MSCI’s all-country world index rose 0.8 percent, while the pan-European FTSEurofirst 300 index closed up 0.3 percent after a 2.9-percent rally in the prior session.