The US Federal Reserve System (FRS) after the meeting on December 15-16 raised the interest rate on federal credit funds (federal funds rate) by 25 basis points - to a target range of 0.25-0.50% per annum, is said in the statement on the results of the December meeting of the Federal Open Market Committee (FOMC).
The decision was unanimous and in line with expectations of economists and market participants.
Prior to this, base rate was found at historically low levels: 0-0.25%, for seven years, from December 2008. In 2008, the rate decreased by 7 times. The last increase was undertaken in June 2006.
In addition, the FOMC raised the discount rate from 0.75% to 1%.
In order to maintain the basic interest rate target in the new range, Fed also announced the allocation of US government bonds worth up to $ 30 billion a day for the reverse repo operations. In total, it is about approximately $ 2 trillion.
Fed expects a more restrained rate increase after 2016.
Head members of the Federal Reserve System (FRS) at the December meeting, gave a more restrained pace forecasts in relation to raising interest rates after 2016, although the assessment of long-term rates range for this cycle remains the same - 3%.
Graphic forecasts of Fed managers, released simultaneously with the statement, show that in 2016 the rate can be increased 4 more times by 25 basis points, while the median forecast is at the level of 1.375%, the same as in September.
The average rate forecast at the end of 2017 is 2.375% instead of 2.625% as of September, for the end of 2018: 3.25% instead of 3.375%.
Macroeconomic Fed forecasts have little changed. The median estimate of GDP growth for 2016 improved from 2.3% to 2.4%, the forecasts for the current year (2.1%) and for the future (2.2% in 2017. 2% in 2018) were left at the same level.
According to the average forecast of Fed officials, unemployment will fall in 2015 to 5%, which coincides with the actual 5% in November; for 2016-2018 its level will be 4.7%.
Personal Consumption Expenditures PCE in 2015 was left at 0.4%. The next year is expected to accelerate to 1.6%, in 2017 up to 1.9%, and in 2018 up to 2%.
Core PCE, in 2015 is likely to be at 1.3%. The targeted 2% is expected only in 2018.