Fed rate hike: What you need to know about ahead of Janet Yellen’s big decision on US interest rates, from why it’s important to when it’s announced
The world is waiting on tenterhooks for the outcome of the Federal Reserve’s monetary policy meeting, with the US central bank widely expected to announce its first interest rate hike in nearly a decade tonight.
Barring “unanticipated shocks”, Fed members are expected to vote to lift rates by quarter to half a percentage point from their current historic low. After years at record low rates, lift-off on short-term rates would have huge implications for markets worldwide.
When is it?
The Federal Open Markets Committee (FOMC) will release its statement at 2pm ET (that’s 7pm in London), after which the Fed’s chief Janet Yellen will hold a press conference.
Why rates are expected to rise
Yellen has been hinting for months that she wants to see rates rise before the year is out, calling a December rate hike a “live possibility” as recently as last month.
After a shaky start to the autumn, the FOMC voted to hold fire on a September rate hike, but at their October meeting, committee members all but confirmed that we were ready for a December lift-off, barring any “unanticipated shocks”.
Since then, US jobs data has been robust, and Janet Yellen recently commented that as the country nudges closer to full employment, her confidence in a rate hike was “bolstered”.
Why it’s interesting
Interest rate changes used to be little more than dull news from a central bank, but in the US and UK, that’s all changed in the past decade.
The Fed hasn’t raised interest rates since 2006, keeping them at a historic low of 0.25 per cent for the past eight years. The Bank of England, for its part, has kept the UK rate unchanged at 0..5 per cent for 79 consecutive months.
A US rate hike is not just a sign of the the US economy’s strength, it’ll also have a huge impact on everything from emerging markets, holding their breath to see if the move to tighten sends the dollar soaring, to mortgage rates.
The best pun
Okay, now for the really important bit: What rate hike jokes are going to get you the most laughs and adulation on social media when the moment comes?
The Fed’s big decision coincides with the release of a new film you may have heard of: Star Wars: The Force Awakens, so naturally economics and sci-fi fans have been punning around The Fed Awakens for the better part of the week.
Sorry, though: it may be too late to steal this one as your own.
Can we do a one-day ban on Fed/Star Wars puns? Like, "the Fed Awakens"? Or, are we just gonna ride this thing out?
— Paul Vigna (@paulvigna) December 15, 2015