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| Federal Reserve hikes interest rates seven years after financial crisis – as it happened | Federal Reserve hikes interest rates seven years after financial crisis – as it happened |
| (about 1 month later) | |
| 9.02pm GMT | 9.02pm GMT |
| 21:02 | 21:02 |
| The market likes the hike | The market likes the hike |
| The Dow reacted favorably to the news – since 2 p.m., when the rate increase was announced, the industrial average has steadily risen and closed up 1.28%. The S&P 500 has followed an almost identical trajectory and closed up 1.45%. Neither Bernie Sanders nor the Guardian editorial board are sold on the rate change; we will doubtless be sussing out the effects of the hike for years go come. The blog is wrapping up for the afternoon but our full story on the meeting, the hike and the reaction from many different sectors is here. | The Dow reacted favorably to the news – since 2 p.m., when the rate increase was announced, the industrial average has steadily risen and closed up 1.28%. The S&P 500 has followed an almost identical trajectory and closed up 1.45%. Neither Bernie Sanders nor the Guardian editorial board are sold on the rate change; we will doubtless be sussing out the effects of the hike for years go come. The blog is wrapping up for the afternoon but our full story on the meeting, the hike and the reaction from many different sectors is here. |
| Keep coming back to the business section as the story unfolds. | Keep coming back to the business section as the story unfolds. |
| Updated | Updated |
| at 9.04pm GMT | at 9.04pm GMT |
| 8.48pm GMT | 8.48pm GMT |
| 20:48 | 20:48 |
| Dean Turner, an economist at UBS, said he believed the market impact would be largely positive, since what financial systems like least is equivocation and the last several months of will-they-or-won’t-they has made investment difficult. | Dean Turner, an economist at UBS, said he believed the market impact would be largely positive, since what financial systems like least is equivocation and the last several months of will-they-or-won’t-they has made investment difficult. |
| “Markets should welcome the decision to hike US rates as it puts months of uncertainty to one side,” he wrote. Turner, who also said UBS favored yield European bonds, said he thought further rate increases would not hurt economic growth domestically. “We expect the pace of tightening next year to be gradual, with four more hikes in 2016. Although this is more hawkish than the markets currently expect, we believe that the US economy will continue to expand.” | “Markets should welcome the decision to hike US rates as it puts months of uncertainty to one side,” he wrote. Turner, who also said UBS favored yield European bonds, said he thought further rate increases would not hurt economic growth domestically. “We expect the pace of tightening next year to be gradual, with four more hikes in 2016. Although this is more hawkish than the markets currently expect, we believe that the US economy will continue to expand.” |
| Turner also said the UK would likely follow suit. “The US interest rate rise is unlikely to influence the timing of the Bank of England’s decision to hike rates,” Turner said. “However, it still looks as though the BoE will be the first central bank to follow the US, though the inflation and wage outlook over the next few months suggests they have time to wait. We currently expect the BoE to raise rates in May, followed by a further hike in November.” | Turner also said the UK would likely follow suit. “The US interest rate rise is unlikely to influence the timing of the Bank of England’s decision to hike rates,” Turner said. “However, it still looks as though the BoE will be the first central bank to follow the US, though the inflation and wage outlook over the next few months suggests they have time to wait. We currently expect the BoE to raise rates in May, followed by a further hike in November.” |
| 8.44pm GMT | 8.44pm GMT |
| 20:44 | 20:44 |
| Jana Kasperkevic | Jana Kasperkevic |
| Jana Kasperkevic, on the ground in DC, spoke to deputy labor secretary Chris Lu about part-time unemployment. | Jana Kasperkevic, on the ground in DC, spoke to deputy labor secretary Chris Lu about part-time unemployment. |
| There are few things that Yellen says the FED is still concerned about - one of them is the “abnormal high level of part-time employment”. | There are few things that Yellen says the FED is still concerned about - one of them is the “abnormal high level of part-time employment”. |
| Earlier this month, the US Department of Labor announced that “the number of persons employed part time for economic reasons” - those who wanted a full time job and could not find one - “increased by 319,000 to 6.1 million in November, following declines in September and October.” | Earlier this month, the US Department of Labor announced that “the number of persons employed part time for economic reasons” - those who wanted a full time job and could not find one - “increased by 319,000 to 6.1 million in November, following declines in September and October.” |
| In an interview with the Guardian, the US Deputy Secretary of Labor Chris Lu dismissed that jump in part-time unemployed. | In an interview with the Guardian, the US Deputy Secretary of Labor Chris Lu dismissed that jump in part-time unemployed. |
| “We don’t focus too much on one month. This 319,000 is really significant drop from the month before. I don’t have the number of what it went down by in October, but if you look at the long-term trend, going back to 2010, it has gone down significantly,” Lu told the Guardian. | “We don’t focus too much on one month. This 319,000 is really significant drop from the month before. I don’t have the number of what it went down by in October, but if you look at the long-term trend, going back to 2010, it has gone down significantly,” Lu told the Guardian. |
| The number of Americans employed part-time for economic reasons in October was about 5.76m. In September, that number was a little more than 6m. | The number of Americans employed part-time for economic reasons in October was about 5.76m. In September, that number was a little more than 6m. |
| Lu is however, correct that the number has come down over the years. Just last year, in November 2014, the number of those working part-time jobs but wanting full time jobs was 6.85m. In 2012, that number was 8.1m. | Lu is however, correct that the number has come down over the years. Just last year, in November 2014, the number of those working part-time jobs but wanting full time jobs was 6.85m. In 2012, that number was 8.1m. |
| When asked if the November jump in part-time workers was significant, Elise Gould, senior economist at the left-leaning Economic Policy Institute also said that the number was not a reason for alarm. | When asked if the November jump in part-time workers was significant, Elise Gould, senior economist at the left-leaning Economic Policy Institute also said that the number was not a reason for alarm. |
| “Those numbers are jumpy,” she told the Guardian. | “Those numbers are jumpy,” she told the Guardian. |
| 8.38pm GMT | 8.38pm GMT |
| 20:38 | 20:38 |
| After clocking in an hour and seven minutes of press conference, Yellen ends her final comments with another assertion that the Fed will watch wages closely (along with inflation, unemployment, and every other economic measure) as it decides whether to hike interest rates again. | After clocking in an hour and seven minutes of press conference, Yellen ends her final comments with another assertion that the Fed will watch wages closely (along with inflation, unemployment, and every other economic measure) as it decides whether to hike interest rates again. |
| Yellen says in a strengthening market we should see increase in wage growth. We have a seen a pick up in average hourly earnings | Yellen says in a strengthening market we should see increase in wage growth. We have a seen a pick up in average hourly earnings |
| 8.36pm GMT | 8.36pm GMT |
| 20:36 | 20:36 |
| Yellen wants Americans to think of the new interest rate as a vote of confidence in the economy. | Yellen wants Americans to think of the new interest rate as a vote of confidence in the economy. |
| Democratic candidate for president Bernie Sanders thinks she’s made a big mistake. | Democratic candidate for president Bernie Sanders thinks she’s made a big mistake. |
| “When millions of Americans are working longer hours for lower wages, the Federal Reserve’s decision to raise interest rates is bad news for working families. At a time when real unemployment is nearly 10 percent and youth unemployment is off the charts, we need to do everything possible to create millions of good-paying jobs and raise the wages of the American people. | “When millions of Americans are working longer hours for lower wages, the Federal Reserve’s decision to raise interest rates is bad news for working families. At a time when real unemployment is nearly 10 percent and youth unemployment is off the charts, we need to do everything possible to create millions of good-paying jobs and raise the wages of the American people. |
| “The Fed should act with the same sense of urgency to rebuild the disappearing middle class as it did to bail out Wall Street banks seven years ago.” | “The Fed should act with the same sense of urgency to rebuild the disappearing middle class as it did to bail out Wall Street banks seven years ago.” |
| And not that the chairwoman asked, the Guardian’s editorial board has also dubbed the increase “risky and premature”, due to the unusual pace of the economy after the recession. | And not that the chairwoman asked, the Guardian’s editorial board has also dubbed the increase “risky and premature”, due to the unusual pace of the economy after the recession. |
| Related: The Guardian view on the US interest rate rise: risky and premature | Editorial | Related: The Guardian view on the US interest rate rise: risky and premature | Editorial |
| 8.31pm GMT | 8.31pm GMT |
| 20:31 | 20:31 |
| Yellen says the Fed isn’t following a calendar for interest rates, but she says it like this: “It is not the intention of the commiIttee to follow any mechanical formula of that type.” | Yellen says the Fed isn’t following a calendar for interest rates, but she says it like this: “It is not the intention of the commiIttee to follow any mechanical formula of that type.” |
| Things Yellen keeps repeating: - this is a small step - gradual increases - Fed will "carefully monitor" factors like inflation | Things Yellen keeps repeating: - this is a small step - gradual increases - Fed will "carefully monitor" factors like inflation |
| “I see import prices and energy prices as holding down” inflation, she says. | “I see import prices and energy prices as holding down” inflation, she says. |
| 8.27pm GMT | 8.27pm GMT |
| 20:27 | 20:27 |
| Dominic Rushe | Dominic Rushe |
| We’re coming towards the end of Yellen’s press conference and so far the stock markets are loving it. The Dow Jones Industrial Average has risen pretty much constantly since she started talking. We’ve come a long way considering that any talk of a rate hike used to send investors into a panic. | We’re coming towards the end of Yellen’s press conference and so far the stock markets are loving it. The Dow Jones Industrial Average has risen pretty much constantly since she started talking. We’ve come a long way considering that any talk of a rate hike used to send investors into a panic. |
| 8.25pm GMT | 8.25pm GMT |
| 20:25 | 20:25 |
| Yellen again dodges a question about what happens if inflation doesn’t do what the Fed wants it to (increase gradually on its way up to 2%). | Yellen again dodges a question about what happens if inflation doesn’t do what the Fed wants it to (increase gradually on its way up to 2%). |
| She alludes to the stock market shocks of international markets and the continuing plummet of energy prices. “I do expect there is a bottom to that, I expect that we’ll be seeing that.” | She alludes to the stock market shocks of international markets and the continuing plummet of energy prices. “I do expect there is a bottom to that, I expect that we’ll be seeing that.” |
| The Fed will keep an open mind about action to cope with inflation, she says, but again refuses to get into what the committee will look for as it judges the consequences of its own decisions. | The Fed will keep an open mind about action to cope with inflation, she says, but again refuses to get into what the committee will look for as it judges the consequences of its own decisions. |
| 8.22pm GMT | 8.22pm GMT |
| 20:22 | 20:22 |
| Long-term loans should not move much because of the decision, Yellen tells a reporter, urging the same calm as she has for nearly an hour. | Long-term loans should not move much because of the decision, Yellen tells a reporter, urging the same calm as she has for nearly an hour. |
| “Loans that are linked to longer term interest rates are unlikely to move very much,” she says, using “some corporate loans” as an example. | “Loans that are linked to longer term interest rates are unlikely to move very much,” she says, using “some corporate loans” as an example. |
| “Some credit card rates and short-term borrowing rates might move up slightly,” she concedes. But “remember,” she says, “we’ve made a very small move.” | “Some credit card rates and short-term borrowing rates might move up slightly,” she concedes. But “remember,” she says, “we’ve made a very small move.” |
| 8.16pm GMT | 8.16pm GMT |
| 20:16 | 20:16 |
| Jana Kasperkevic | Jana Kasperkevic |
| Today’s decision follows months of debate and dissent, my colleagues Jana Kasperkevic and Rupert Neate note – but today’s decision was unanimous. | Today’s decision follows months of debate and dissent, my colleagues Jana Kasperkevic and Rupert Neate note – but today’s decision was unanimous. |
| In his analysis of the minutes from the October’s meeting, Rupert observed: “’a couple’ members raised concerns that raising rates in December could be premature.” | In his analysis of the minutes from the October’s meeting, Rupert observed: “’a couple’ members raised concerns that raising rates in December could be premature.” |
| The first dissent this year came during the September meeting, when Jeffrey Lacker, president of the Federal Reserve Bank of Richmond, broke ranks and voted to increase the interest rates. | The first dissent this year came during the September meeting, when Jeffrey Lacker, president of the Federal Reserve Bank of Richmond, broke ranks and voted to increase the interest rates. |
| “US economic conditions have improved quite significantly over the last six years, all things considered. It’s time to recognize the substantial progress that has been achieved and align rates accordingly,” Lacker said at the time. | “US economic conditions have improved quite significantly over the last six years, all things considered. It’s time to recognize the substantial progress that has been achieved and align rates accordingly,” Lacker said at the time. |
| “I supported raising the target range for the federal-funds rate by 25 basis points at this meeting. Interest rates have been near zero for over six years. Even after a quarter-point increase, interest rates would remain exceptionally low, providing ample support for economic growth. ” | “I supported raising the target range for the federal-funds rate by 25 basis points at this meeting. Interest rates have been near zero for over six years. Even after a quarter-point increase, interest rates would remain exceptionally low, providing ample support for economic growth. ” |
| Lacker’s dissent broke a stretch of five straight unanimous votes – spanning back to January of this year. | Lacker’s dissent broke a stretch of five straight unanimous votes – spanning back to January of this year. |
| Updated | Updated |
| at 8.43pm GMT | at 8.43pm GMT |