Wednesday, December 14, 2016

Fed raises interest rates for first time in a year

This chart shows the change in unemployment rate compared with the number of monthly jobs added 
from 2009 through early 2016. The current unemployment rate has dropped to about 4.6%.
By Ben Moore - Own work, CC BY-SA 3.0,

The Federal Reserve's open market committee began its much anticipated December meeting Wednesday with some much anticipated news: Yes, committee members unanimously voted to raise the central bank's interest rate by 0.25 percent. This matches the increase made at last December's meeting, which was the benchmark interest rate's first increase in nearly a decade.

Since the election of Donald J. Trump as the U.S. president-elect in November, the stock markets have been rapidly rising following the expectation of pro-growth policies. Trump has indicated he intends to promote corporate tax cuts and increased spending for infrastructure projects, which are projected to boost inflation. The Fed has been seeking higher inflation rates closer to 2 percent before raising interest rates too aggressively - inflation is currently at about 1.5 percent.

Fed expecting more growth, gradual rate increases

Fed officials said they expect to raise interest rates a few more times throughout 2017, dependent on continued economic growth. The national unemployment rate is currently about 4.6 percent and the GDP expanded by about 3.2 percent in the 3rd quarter of 2016.

Mortgage interest rates have been rising since the Nov. 8 election but were not dramatically affected by the Fed's announcement this week since markets have long factored a bump into projections. To learn more about rates available to purchase a home or refinance, contact a Vertex Loan Advisor at 877-939-0339.