The Federal Reserve has raised short-term interest rates for the first time in nearly a decade, calling an end to the near-zero borrowing costs that have prevailed since the US was struck by the worst financial crash in modern times.
In a landmark step, the US central bank announced a quarter-point increase in the target range for the federal funds rate to 0.25-0.5 per cent, lifting it from the historic lows it has occupied since December 2008, when the US was mired in an economic crisis that would ultimately drive unemployment to 10 per cent.
Policymakers expect only “gradual” future increases in the federal funds rate after yesterday’s move, the Fed said in a statement. It added that given the current shortfall in inflation compared with its 2 per cent target, it would “carefully monitor actual and expected progress” towards its inflation goal.