US Federal Reserve raises interest rates

The US Federal Reserve has voted to raise the target for its benchmark interest rate by 0.25%, citing solid economic expansion and job gains.
This will lift the central bank’s benchmark rate to the highest level since 2008 by 25 basis points with a target range between 1.75% and 2%.

The tighter policy reflects expectations that US growth and inflation will prove stronger than officials anticipated in March, while the unemployment rate continues to fall.

Projections released after the Fed’s two-day meeting in Washington show policymakers expect the US economy will grow 2.8% this year, while unemployment falls to 3.6%.

This is another step on the road back to normal after the emergency measures taken following the financial crisis of 2008.

Most of the other largest developed economies (Japan & Eurozone) are still engaged in quantitative easing, and their main cash rates are lose to or at zero. The Fed stopped that in 2014 and has made a start on reducing its holdings of trillions of dollars’ worth of assets. That reflects the fact that the US recovery after the crisis has been stronger, and inflation is getting closer to the Fed’s target.