The Federal Funds Rate And How It Impacts You

Janet Yellen chair of the U.S. Federal Reserve adjusts her glasses during a meeting of the Board of Governors of the Federal Reserve in Washington D.C. U.S. on Tuesday

Oil prices fell to three-month lows after OPEC reported that crude inventories in developed countries had risen above the five-year average in January despite production cuts by some of the world's largest exporters.

The Dow Jones Industrial Average (DJI) jumped almost 68 points, or a third of a percent, in the minutes leading up to and immediately after the Fed's decision.

Nakosteen said consumers might see rates for borrowing tools like home mortgages and auto loans creep upward.

Kocherlakota was also well-known for a sharp shift in his views. As a result, the Fed today did exactly what markets expected, on one hand, by raising rates.

Kashkari, meanwhile, first entered the public spotlight when, at the Treasury Department, he ran the Troubled Asset Relief Program, or TARP, the 2008 Wall Street bailout.

On Wednesday, the USA central bank is nearly universally expected to raise its benchmark interest rates, a move that just a few weeks ago was viewed by the markets as unlikely.

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Not only do analysts believe a rate hike is coming this week, there is also rising expectations of more hikes coming quicker than previously expected. Participants estimated a target rate of 1.4 percent for 2017, a 2.1 percent rate for 2018, and a 3.0 percent rate for 2019.

The rest of the SEP forecasts remained unchanged as well, with the Fed members expecting economic growth of 2.1 percent this year and next, with an unemployment rate of 4.5 percent. A rate increase at the end of 2015 was seen at the time as the start of a sustained upward move.

"The Committee expects that, with gradual adjustments in the stance of monetary policy, economic activity will expand at a moderate pace, labor market conditions will strengthen somewhat further, and inflation will stabilize around 2 percent over the medium term", the FOMC wrote in a statement". Fed officials made no secret of their intentions this month, with markets gearing up for a return to "normal" rates after a long period of hovering just above zero.

"As with the general interest rate environment, they've been rock bottom for years", he said.

That means officials are feeling good about economic growth, worrying more about inflation, and finally settling into a traditional monetary-policy-making groove after years of worrying that the economy wasn't strong enough to handle a rate increase.

The broad-based S&P 500 shed 0.2 per cent to 2,367.70, while the tech-rich Nasdaq Composite Index dropped 0.3 per cent to 5,857.85.

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