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US raises benchmark rate by 0.25% US raises benchmark rate by 0.25%
(35 minutes later)
The US Federal Reserve has raised its benchmark interest rate by 0.25% for only the third time in a decade.The US Federal Reserve has raised its benchmark interest rate by 0.25% for only the third time in a decade.
The central bank voted to raise its key rate target to a range of 0.75% to 1%.The central bank voted to raise its key rate target to a range of 0.75% to 1%.
The Fed had been expected to raise rates after a robust February jobs report, solid pay gains, rising inflation and a dip in the unemployment rate to 4.7%.The Fed had been expected to raise rates after a robust February jobs report, solid pay gains, rising inflation and a dip in the unemployment rate to 4.7%.
Federal Reserve policymakers are expected to increase rates a total of three times this year.Federal Reserve policymakers are expected to increase rates a total of three times this year.
The Fed aims to keep the cost of lending between banks within a specified band, which it does by buying or selling financial assets.
It is raising that band by a quarter of a percent.
Fed Chair Janet Yellen said the committee judged that a "modest increase" in the rate is appropriate "in light of the economy's solid progress."Fed Chair Janet Yellen said the committee judged that a "modest increase" in the rate is appropriate "in light of the economy's solid progress."
"Even after this increase, monetary policy remains accommodative, thus supporting some further strengthening in the job market, and a sustained return to 2% inflation," she added."Even after this increase, monetary policy remains accommodative, thus supporting some further strengthening in the job market, and a sustained return to 2% inflation," she added.
The decision was approved with a 9-1 vote. Neel Kashkari, the head of the Fed's regional bank in Minneapolis, cast the dissenting vote.The decision was approved with a 9-1 vote. Neel Kashkari, the head of the Fed's regional bank in Minneapolis, cast the dissenting vote.
Wall Street stock indexes jumped after the announcement, with the Dow Jones Industrial Average up 92 points at 20,929 in afternoon trading.Wall Street stock indexes jumped after the announcement, with the Dow Jones Industrial Average up 92 points at 20,929 in afternoon trading.
The Fed aims to keep the cost of lending between banks within a specified band, which it does by buying or selling financial assets. The US dollar fell about 0.6% against the euro and 0.8% against the pound.
It is raising that band by a quarter of a percent. Plain sailing?
Luke Bartholomew, an investment manager at Aberdeen Asset Management, said the Fed "faces a tricky path from here".
The US economy may turn out to be stronger than expected, leaving the Fed playing catch-up, he said.
"Meanwhile, they're facing increasingly shrill calls for their independence to be curtailed. It's hard to imagine that the rest of this hiking cycle will go off without a hitch," he added.