US Federal Reserve raises interest rates for first time since 2006

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The US Federal Reserve has voted to raise interest rates for the first time since 2006.

The central bank opted to push up interest rates by 0.25%.

In a statement the Fed said “Economic activity has been expanding at a moderate pace. Household spending and business fixed investment have been increasing at solid rates in recent months, and the housing sector has improved further.

“A range of recent labor market indicators, including ongoing job gains and declining unemployment, shows further improvement and confirms that underutilization of labor resources has diminished appreciably since early this year.”

The widely expected move reflects the US economy’s recovery. Headline unemployment is currently sitting at just 5% having fallen from a peak of 10% in 2009 and GDP has been rising steadily.

While it will push up the cost of borrowing for Americans, most commentators do not expect it to have a destructive effect on household spending or company investment.

Developing nations, which often borrow in dollars, may be the hardest hit.

The Bank of England’s Monetary Policy Committee is not expected to follow in the Fed’s footsteps at its next meeting in January.

At present, markets are predicting that the Bank will lift rates from the current rock-bottom level of 0.5% in the latter part of 2016.

Economists suggested a shock slowdown in wage growth revealed in figures published earlier on Wednesday will likely keep UK rates on hold for the coming months.

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December 16, 2015 |
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