US Federal Reserve raises interest rates for third time since financial crisis

Economists aren’t unanimous about a rate hike to a range of 0.75% to 1.00%, but it’s close.

The decision itself only changes the rate at which banks borrow from the Federal Reserve, but the ripple effects are substantial. “By staying with their projections of three rate hikes this year and next, the Fed is maintaining flexibility around the exact timing of rate hikes”, he wrote.

The Fed’s rate hikes won’t necessarily raise auto loan rates.

Yellen said Wednesday that GDP is a “noisy” indicator from quarter to quarter and believes the economy over the long run is running at about a 2 percent pace.

That became a foregone conclusion after the Labor Department announced last Friday that there were 235,000 new jobs created in February and that the unemployment rate declined by one-tenth of a percentage point, to 4.7 percent.

Are auto loans interest rates going up?

The Bank of England and the European Central Bank are not however in the business of raising interest rate in the near future.

The average consumer with $16,000 in credit card debt can expect to pay about $40 dollars more in interest every year based on the current average of 15 percent interest. Treasuries fell amid steeper declines for United Kingdom bonds after the Bank of England (BOE) moved closer to raising rates. Yellen emphasized the Fed’s desire to return interest rates to a more “normal” level.

Fed policymakers are also pleased by an improving global economic outlook, with euro zone growth edging up and China looking more stable than a year ago.

“It is inevitable for local rates to move up”, said CIMB economist Song Seng Wun.

“I think the dollar might have trouble above the 115 level today, with Japanese exporters still seeking to sell above it ahead of the end of the Japanese fiscal year this month”, said Kaneo Ogino, director at foreign exchange research firm Global-info Co in Tokyo. But some people say it’s premature to raise rates. The Dow closed up by 113 points on Wednesday following the well-telegraphed Fed decision and press conference, adding to its post-election surge.

Along with the statement, the Fed will also release the latest dot plots and forecasts.

“The Committee expects that economic conditions will evolve in a manner that will warrant gradual increases in the federal funds rate”, the central bank said in its statement, pointing to recent increases in inflation to within its target rate, and of the continued improvements in the labor market.

And it adopted some new language hinting that it might be tolerant of higher-than-optimal inflation for some unspecified period. The Fed may revise headline inflation higher by 1/10th of a point to 2 percent, and core to 1.9 percent, Feroli estimates.

“It ticks all the boxes for the Fed to move next week”, said Michael Hanson, chief USA macro strategist at TD Securities in NY.