Fed Raises Interest Rate

December 14, 2016

The Federal Reserve voted on December 14 to raise its key interest rate by 0.25% to a range of 0.5% to 0.75%, up from the 0.25% to 0.5% rate range that has been in place since December 2015.

“The labor market has continued to strengthen and economic activity has been expanding at a moderate pace since mid-year”, the Fed said in its statement. “Job gains have been solid in recent months and the unemployment rate has declined.” The rate hike indicates the U.S. economy is doing well and that business and consumers can afford to pay more to borrow. This rate increase is the first this year and the first since last December when the Fed ended a seven-year stretch of near-zero rates. (Read our comments on the 2015 rate hike here)

What can you expect from these rates as a consumer? As the rate increase makes its way through the financial system, you might see slightly higher borrowing costs for home and car buyers. While this increase likely won’t be significant, if you’re in the market for a new house or car it would be smart to start paying attention! You might also see some volatility as the market adjusts to the Fed’s decision, but any turbulence will likely be short-lived as this rate increase was widely expected.

As the Fed’s policies and outlook for 2017 become more clear, we will keep you informed on any further rate hikes and their potential implications for you.

As always, please don’t hesitate to contact your Russell Capital advisor with any questions or concerns.