The (likely) winners and losers after the Fed’s rate hike

The target for the overnight interest rate has been raised, and the Fed will aim for 0.25% to 0.50% in the Federal Funds market, which is only traded by banks and the Federal GSEs.

The following are highlights from Federal Reserve Chair Janet Yellen’s press conference on Wednesday following the end of a two-day meeting of the USA central bank’s policy-setting committee.

The Federal Reserve is raising interest rates from record lows set at the depths of the 2008 financial crisis, a shift that heralds modestly higher rates on some loans.

The central bank justified the hike by saying the economy had improved enough to support it, and emphasized that it would be moving very gradually to bring borrowing costs back up to more historically normal levels.

“The Committee judges that there has been considerable improvement in labor market conditions this year, and it is reasonably that confident inflation will rise”, the Fed said in its statement.

In projections that accompanied Wednesday’s monetary policy decision, Fed officials expressed confidence that a growing economy will justify a significant increase in rates during the coming year. That might then prompt the Fed to delay further rate hikes.

The US Federal Reserve raised interest rates.

Jim O’Sullivan, chief USA economist at High Frequency Economics, said he thinks rates will still rise faster than the Fed suggests.

Yet the Fed made the move despite low inflation because its policies operate on a lag.

“Given the strength of the signals that have been sent it would be credibility destroying not to carry through”, former Treasury Secretary Larry Summers, a skeptic of the need to raise rates right now, said in remarks published Tuesday on his website.

The Labor Department said non-farm payroll employment jumped by 211,000 jobs in November compared to economist estimates for an increase of about 190,000 jobs. One risk is said to be that higher rates may also cause the dollar to rise. Its move ends an extraordinary seven-year period of near-zero borrowing rates. The vote was unanimous. But the 2016 figure is 0.1 percentage point less than the September forecast and still below the Fed’s annual 2% target. The modest move increased the range for the funds rate from between zero and 0.25 percent to a range of 0.25 percent to 0.5 percent.

Scott Guitard, a portfolio manager at Fiduciary Trust Canada, said climbing American interest rates will likely mean the opposite for the Canadian dollar.

By 2:12pm, Wells Fargo announced it would be raising the rates it charges customers for loans from 3.25% to 3.5%. But the central bank has tested other tools to help it achieve the increases it wants in the funds rate.