– Markets react positively –
The announcement, and the Fed’s positive outlook for US growth, pushed Asian and US stocks higher, with the S&P 500 finishing with a 1.5 percent gain, most of which came after the Fed’s announcement.
Stocks in Australia, Tokyo and Hong Kong were all up, and the dollar rose slightly against the euro.
The rate increase came amid some criticism from prominent economists that the economy was still vulnerable to slower global growth and that there was no compelling reason – like surging inflation and a tight jobs market – to justify it.
But FOMC support for the decision was unanimous. The committee pointed to “considerable” improvement in the labor market and said it is “reasonably confident” in inflation rising over the medium term, to its two percent objective.
“The first thing that Americans should realize is that the Fed’s decision today reflects our confidence in the US economy,” Yellen told a press conference.
“While things may be uneven across regions of the country, and different industrial sectors, we see an economy that is on a path of sustainable improvement.”
Yellen predicted the challenges of ultra-low inflation and continued slack in the labor market would both diminish significantly over the coming year.
“What we would like to avoid is a situation where we have waited so long that we are forced to tighten policy abruptly, which risks aborting what I would like to see as a very long-running and sustainable expansion,” she explained.
