FOMC Press Conference December 16, 2015 | Summary and Q&A

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December 16, 2015
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Federal Reserve
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FOMC Press Conference December 16, 2015

TL;DR

The Federal Reserve decided to raise the target range for the federal funds rate by 0.25 percentage points, marking the end of a seven-year period of near-zero interest rates and reflecting the Committee's confidence in the strength of the U.S. economy.

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Key Insights

  • 🤨 The Federal Reserve's decision to raise interest rates reflects its confidence in the strength of the U.S. economy.
  • 🤨 The raise in interest rates is small and monetary policy remains accommodative.
  • ❓ The Federal Reserve will continue to monitor economic and financial conditions and make adjustments to policy as necessary.
  • 🤪 Wage growth and inflation will be important factors in the Federal Reserve's decision-making process going forward.
  • ☠️ The raise in interest rates may have minimal short-term impact on consumers, but could affect borrowing rates in the long-term.
  • 🫢 The Federal Reserve is aware of the risks associated with the raise in interest rates, but believes that the U.S. economy is well-positioned to handle any potential shocks.

Transcript

CHAIR YELLEN. Good afternoon. Earlier today, the Federal Open Market Committee decided to raise the target range for the federal funds rate by 1/4 percentage point, bringing it to 1/4 to 1/2 percent. This action marks the end of an extraordinary seven-year period during which the federal funds rate was held near zero to support the recovery of the ... Read More

Questions & Answers

Q: Why did the Federal Reserve decide to raise interest rates?

The Federal Reserve decided to raise interest rates because it believes that the conditions set out for a rate hike - further improvement in the labor market and confidence in inflation reaching 2% - have been satisfied.

Q: What are the key factors that the Federal Reserve considered in its decision to raise interest rates?

The Federal Reserve considered the strength of the U.S. economy, improvements in the labor market, and its confidence in inflation reaching its 2% target. It also took into account the risks from the global economy and the need to make a timely and gradual adjustment to interest rates.

Q: How will the raise in interest rates affect consumers?

The raise in interest rates will have a minimal impact on consumers in the short-term. Some borrowing rates, such as credit card rates, may increase slightly, but longer-term interest rates are not expected to change significantly.

Q: What are the risks associated with the raise in interest rates?

The Federal Reserve is monitoring the risks to the economy, including potential financial market developments and the impact on emerging markets. It is also aware of the potential for downside risks, such as weaker economic conditions abroad, but believes that the risks to the outlook for both economic activity and the labor market are balanced.

Summary & Key Takeaways

  • The Federal Reserve has decided to raise interest rates by 0.25 percentage points, bringing the target range for the federal funds rate to 0.25-0.5%.

  • The decision marks the end of a period of near-zero interest rates that lasted for seven years.

  • The Fed is confident in the strength of the U.S. economy, but acknowledges that further improvement in the labor market and inflation is still needed.

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