17 Dec 2015

US Fed raises interest rates for first time in nine years

9:40 am on 17 December 2015

The United States Federal Reserve has raised interest rates for the first time in nearly a decade and signalled it is on a gradual tightening path as the US economy has finally emerged from the global financial crisis.


The US Federal Reserve raised interest rates . Photo: AFP

The central bank raised the range of its benchmark interest rate by a quarter of a percentage point to between 0.25 percent and 0.50 percent, which had been anticipated by financial markets and investors for the past six months.

"The committee judges that there has been considerable improvement in labor market conditions this year, and it is reasonably confident that inflation will rise over the medium term to its 2 percent objective," the Fed said in its unanimous policy statement.

However, Federal Reserve head Janet Yellen emphasised the rate rise was the start of what will be a gradual tightening cycle, and its next move will depend on the outlook for inflation.

Financial markets reacted by pushing the US dollar and stock markets higher, although the gains were trimmed.

The New Zealand dollar dipped more than a quarter of a cent immediately to 67.45 US cents before rebounding to 68.2 US cents.

Westpac senior currency strategist Imre Speizer said, "Janet Yellen has been stressing the idea that the rate hike path will be very gradual, and that's a dovish spin which is pushing the US dollar down and the New Zealand dollar higher."

The US Federal Reserve building as seen August 1, 2015 in Washington, DC. AFP PHOTO / KAREN BLEIER

The US Federal Reserve building Photo: AFP