Washington: America’s central bank, the Federal Reserve is on Wednesday widely expected to raise its key interest rates for the first time in nearly a decade, signalling recovery of the US economy from the financial crisis.
Janet Yellen, the Fed’s first woman chair in itss 112-year history, would announce the decision at the conclusion of the crucial two-day meeting of the policy-making Federal Open Market Committee (FOMC).
The decision will come after a thorough review of the unemployment situation, inflation and the global economy to determine if the US economy is strong enough for an interest-rate hike, analysts said.
The Fed last raised the rates in June 2006 to cool down a heated economy with unemployment at 4.4 percent and the housing bubble about to burst.
The rate hike, according to CNN Money, would be a good sign for the economy as it will signal the bank’s confidence in the strength of the economy and its ability to handle higher borrowing costs.
It would also show how far the economy has come since the Great Recession ended in 2009, when unemployment hit 10 percent, it said. Now unemployment is at 5 percent.
The Fed put rates near zero in December 2008 to boost the economy and stimulate the collapsed housing market. Rates haven’t budged since then.
Fed will likely increase rates from near zero to 0.25 percent and then raise rates at a slow, gradual pace next year, analysts said.
But the Washington Post wondered if Federal Reserve, whether it raises rates on Wednesday, as seems likely, or sometime next year, would eventually end up “back where it started – at zero”.
“That, after all, is what has happened to every other country that has tried to ‘lift off’ from what economists call ‘the zero lower bound,'” it said.