Federal Reserve Chair Janet Yellen announced Wednesday interest rates would be increased for the first time since the 2008 financial crisis, leaving many wondering how the move would affect their finances.
The Board of Governors of the Federal Reserve System voted unanimously in favor for the hike, saying the economy is finally stable enough to graduate to pre-crisis levels.
While the rate increase is expected to make borrowing more expensive, Americans will also see higher yields in their savings accounts and certificates of deposit.
Yellen indicated loans with long-term interest rates will likely to remain stable, but credit card rates could see a slight increase, adding that it shouldn’t have a dramatic effect in the near future.
While the small, gradual rise won’t have an immediate or drastic effect, economists say the in the long-term, the changes will be evident to consumers.
“Eventually, the impact on consumers will be more pronounced,” Mark Zandi, chief economist at Moody’s Analytics told The New York Times. “If the Fed continues to tighten in 2017 as they now forecast, stock, bond and currency markets will come under pressure.”
The target range, which hovered around zero for years, now stands a .5 percent and will gradually be increased by .25 percent.
“This action marks the end of an extraordinary seven-year period during which the federal funds rate was held near zero to support the recovery of the economy from the worst financial crisis and recession since the Great Depression,” Yellen said. “It also recognizes the considerable progress that has been made toward restoring jobs, raising incomes, and easing the economic hardship of millions of Americans.”
The chair of the central bank said with the gradual increase they expect to see the job market, which has seen an average of 218,000 gains per month, to continue to grow and economic activity to expand at a moderate pace.
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