Fed raises key interest rate

Yellen Federal Reserve

The Fed's Open Market Committee voted 9 to 1 to increase the rate 0.25 percentage points to a target between 0.75% and 1%, with only Neel Kashkari, president of the Federal Reserve Bank of Minneapolis, dissenting because he preferred to keep the rate steady.

Many who have been considering buying a house have been wondering how the recent Fed rate increase will affect them.

When Fed Chair Janet Yellen was pressed on this during her post-announcement press conference by Bloomberg TV's Kathleen Hays, Yellen said "GDP is a pretty noisy indicator" and talked up ongoing evidence of labor market tightness (potentially leading to an acceleration of wage inflation), especially with demographic headwinds (retiring baby boomer) likely to weigh on labor force participation.

The Federal Reserves move to hike interest rates by 25 basis points, only the third hike in over 10 years and second in 3 months, marks the beginning of a new phase of U.S. monetary policy normalisation, says Fitch Ratings.

The Australian dollar had unexpectedly risen earlier this morning by more than 2 per cent after the US Federal Reserve's decision, before steadying somewhat at $US77.07.

Let's say what Yellen won't: A big stimulus package - even one that is heavy on tax cuts - would nearly certainly spur the Fed to hike faster.

Average rates for 30-year mortgages rose this week to 4.29 percent, the highest level since January 2014, according to the Mortgage Bankers of America.

The Nasdaq Composite .IXIC was up 6.38 points, or 0.11 percent, at 5,863.20.

However, the impact of dollar strengthening could have wider global effects, the statement said. Investors see a 60 percent chance that the Fed will raise rates three or more times this year, based on prices in futures markets Friday. The move reflects a consistently solid United States economy and will likely mean higher rates on some consumer and business loans.

What this series of moves tells us is that that the Fed's policy makers think the U.S. economy is in reasonably good shape, that it no longer needs the support provided by such very low interest rates.

The Fed is scheduled to release its latest policy statement along with updated economic forecasts at 2 p.m. ET (1800 GMT). His wife works part-time as an office administrator.

The Branstetters recently paid off the mortgage on their home and have zero debt.

He expected an increase of 1.5 per cent to 2 per cent in fixed mortgage rates over the course of the next two years.

An interest rate hike indicates economic growth.

In its quarterly economic projections, the central bankers still predict the federal funds rate will rise to 1.4 percent by the end of the year, which would imply another two increases, unchanged from the previous forecast.

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