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US Federal Reserve raises interest rates by 0.25%

The Federal Reserve has raised interest rates for first time in nearly a decade. Credit: Reuters

The US Federal Reserve has increased interest rates by 0.25 percent, the first increase in over nine years.

The rise was mainly due to information received by the Federal Reserve that suggested economic activity had "been expanding at a moderate pace".

The board of the Federal Reserve voted unanimously for the increase.

The last time it raised interest rates was in 2006.

Traders work on the floor of the New York Stock Exchange after US Federal Reserve raised interest rates. Credit: Reuters

Although the move is small, it is said to signal a vote of confidence in the American economy.

It brings to an end an unprecedented period of low interest rates, which were part of policies created to stimulate the US economy.

Rates in the US have been near zero since 2008.

With gradual adjustments in the stance of monetary policy, economic activity will continue to expand at a moderate pace and labor market indicators will continue to strengthen.

– Federal Reserve statement

The Federal Reserve also said that it was confident that inflation will rise over the medium term, to its two percent objective.

In early December, the Federal Reserve chair - Janet Yellen - indicated to Congress' joint economic committee that the US economy was strong enough for interest rates to rise.

The rise is seen as a vote of confidence in the American economy. Credit: Reuters

The Bank of England this month voted to keep rates on hold at 0.5 percent in the UK - the same level they have been for more than six years.

Bank of England Governor Mark Carney has stressed that a rise in US rates does not mean UK borrowing costs will have to increase.

He told the Financial Times ahead of the Federal Reserve's decision that the UK still faced a "low for long" scenario, stating the economic conditions for a rise in the UK were still not in place.