Fed Raises Key Interest Rate

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FED RAISES KEY INTEREST RATE

Source: CAR
The Federal Reserve announced Wednesday that it is raising interest rates from record lows. The Fed coupled its first rate hike in nine years with a signal that further increases will likely be made slowly as the economy strengthens further and inflation rises from undesirably low levels.

Wednesday’s action signaled the central bank’s belief that the economy has finally regained enough strength 6½ years after the Great Recession ended to withstand modestly higher borrowing rates.

The Fed said that it was lifting its key rate by a quarter-point to a range of 0.25 percent to 0.5 percent. Its move ends an extraordinary seven-year period of near-zero borrowing rates. But the Fed’s statement suggested that rates would remain historically low well into the future, saying it expects “only gradual increases.”

According to C.A.R.’s Chief Economist, Leslie Appleton-Young, “The Federal Reserve’s announcement today to raise the federal funds rate negligibly has long been anticipated and shouldn’t have a significant adverse impact on the housing market since rates are still historically low. In fact, it may spur potential home buyers who have been waiting on the sidelines to finally jump in now that they see the rates may continue to rise slowly in the next couple of years.”

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