Today the US Federal Reserve (their central bank), headed up by Janet Yellen, raised the US interest rate by a quarter of a percentage point to 0.75% from 0.5%.
For the decision, Janet Yellen explained:
- The Fed recognizes the considerable progress towards dual objectives of maximum employment and price stability,
- Inflation has moved closer to the longer run goal of 2%,
- Only gradual increases in the federal funds rate (aka the interest rate), will be seen over the next few years,
- The economic outlook is highly uncertain (Trump Trump Trump – I added that part in)
- Rates will reflect the outlook and associated risks, and
- Change in economic policy could change the outlook, and thereby the rate.
Janet and the Federal Reserve also “signaled a faster pace of [interest rate] increases in 2017 as the Trump administration takes over with promises to boost growth through tax cuts, spending and deregulation” (Globalnews.com).
How does the US rate change affect Canada? Well, upon the announcement our dollar fell from an eight-week high against the US dollar to $0.75 to US $1.00.
Read our analysis of interest rates and their economic effects here.
Feature image taken outside the Washington Federal Reserve in Washington, DC on November 1, 2016
