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Federal Reserve Chair Announces Decision To Raise Benchmark Interest Rate


Federal Reserve policymakers hiked their benchmark interest rate today for only the second time since the Great Recession. But officials signaled there would be more rate hikes in the coming year. NPR's John Ydstie reports.

JOHN YDSTIE, BYLINE: In her news conference following the policymaking meeting, Fed Chair Janet Yellen said the move by the central bank should be viewed as a vote of confidence in the U.S. economy.


JANET YELLEN: The economy has proven to be remarkably resilient, so it is a vote of confidence.

YDSTIE: Yellen said the rate hike was justified by the economy's continued progress towards the Fed's goals of maximum employment and stable prices. In fact, the current unemployment rate at 4.6 percent is slightly better than the Fed's goal while inflation is still below its 2 percent target.

While this rate increase has been long anticipated and gotten a lot of attention, Yellen said there won't be much effect on the finances of the average household.


YELLEN: I think that households and firms will see very modest changes from this decision.

YDSTIE: In fact the cost of an average six-year car loan will likely rise only a few dollars a month. Meanwhile, rates for fixed mortgages aren't likely to rise much because the Fed move was well-anticipated.

The rate on the 10-year Treasury, a benchmark for many mortgages, rose just one-tenth of a percent after the hike, and that move was probably due to new forecasts from Fed policymakers that showed they expect to raise interest rates three times in 2017. That's after raising rates only once this year and once last year. That is one more rate hike in 2017 than the Fed had previously signaled, but Yellen said the Fed is still not in a big hurry.


YELLEN: We continue to expect that the evolution of the economy will warrant only gradual increases in the federal funds rate over time to achieve and maintain our objectives.

YDSTIE: The stock market sold off as it digested the news of an additional rate hike next year. Yellen was also asked whether President-elect Donald Trump's promises to boost spending for infrastructure and cut personal and business taxes were necessary to boost employment. She said the economy would likely achieve full employment without them. As for the president-elect's promise to roll back financial regulation under Dodd-Frank, Yellen suggested that was not a good idea. John Ydstie, NPR News, Washington. Transcript provided by NPR, Copyright NPR.