The American central bank, the Federal Reserve, raised interest rates on Wednesday for the first time in nearly a decade, signaling confidence that the U.S. economy has largely overcome the effects of the financial crisis of 2007-2009.
The committee that sets the policy for the American central bank raised its key interest rate from nearly zero by a quarter of a percentage point to a range between 0.25 percent and 0.50 percent, ending a long debate over whether the economy is strong enough to withstand higher borrowing costs.
“The committee assesses that there has been a significant improvement in labor market conditions this year and is quite confident that inflation will rise in the medium term to the 2 percent target,” the Fed said in a statement that was unanimously adopted.
The Fed made it clear that the rate hike is the beginning of a gradual tightening and that monitoring inflation, which is below target, will be key in deciding its next move.
The Fed’s new economic projections remained largely unchanged since September, with unemployment expected to fall to 4.7 percent next year and economic growth at 2.4 percent.
The Fed lowered its key rate to zero at the end of 2008 to stop the economic decline after the housing market collapse took down Wall Street giants and shook global confidence in the American financial system.
The last time the Fed raised interest rates was in 2006.
