As was expected The Federal Open Market Committee today approved a quarter-point increase in its target funds rate. The new target will go from 0 percent to 0.25 percent to 0.25 percent to 0.5 percent. The Federal Funds Rate has remained at zero for the last 7 years to support the recovery of the economy from the financial crisis. The stock market has boomed during the period of zero rates, rising 207 percent since the March 2009 low point. Today’s first rate hike since 2006 pleased investors. All the major indices saw big gains today.
Wells Fargo announced almost immediately it would increase its prime rate to 3.5 percent effective tomorrow. It was the first major bank to announce a change to the base rate for consumer loans, which has been at 3.25 percent since 2008, according to the Federal Reserve’s weekly surveys of the largest 25 banks. U.S. Bancorp also announced a rise to 3.5 percent, as did JPMorgan Chase.
In a press conference following the Fed statement release:
Fed Chair Janet Yellen said not to overblow the significance of the first hike and that policy remains accommodative. She also said “persistent changes” in market conditions would be needed to move the Fed off track.
See more of Janet Yellen‘s press conference below.
Housing starts rose 10.5 percent in November, while building permits rose 11 percent. Mortgage refinances rose 1 percent on rate fears.
More on today’s announcement on a Federal Funds Rate hike from CNBC below:
Here are the final numbers from Wednesday, 12/16/15 on Wall Street:
Dow Jones Industrial Average: 17, 749.09 (+224.18/ +1.28%)
NASDAQ: 5,071.13 (+75.78 / +1.52%)
S&P 500: 2,073.07 (+29.66 / +1.45%)