We start with the news that the U.S. Federal Reserve has increased the key interest rate
for the first time since 2006.
It's a momentus decision as the rate has been at unprecedented low levels since the global
financial crisis.
For more,... let's connect to our Shin Se-min who is standing by at our new center.
Se-min.
Good morning, Mark.
After seven years of rock-bottom rates,… at last there is liftoff.
It was widely expected,... but the Fed announced within the last two hours or so that it will
increase its benchmark rate by one-quarter of a percentage point.
Shortly after the announcement,...
Fed chair Janet Yellen gave a press conference,... laying out the reasons behind the decision.
"The committee judged that a modest increase in the fed funds rate target is now appropriate,…
recognizing that even after this increase, monetary policy remains accommodative.
And it reflects committee's confidence that the economy will continue to strengthen."
The Federal Open Market Committee judged that the U.S. economy and the labor market is healthy
enough to begin the process of normalizing rates,… recovering from the worst financial
crisis since the Great Depression.
The U.S. central bank has kept its benchmark rate near zero since December 2008,… as
a show of effort to stimulate the economy and restore confidence in the financial markets.
The U.S. labor market recently added 211-thousand jobs in November and there's confidence inflation
is starting to climb to the Fed's target rate of two-percent.
And how is Wall Street reacting to the news?
Well,... minutes after the announcement, U.S. stocks have jumped with the Dow Jones industrial
average going up some 60-points, or point-three percent and the S&P 500 index going up half-a-percent
higher.
As of a few minutes ago,... the Dow was up 255 points or one-point-two percent and the
S&P was up one-point-four percent.
In the coming few hours we will see how Korea's stock market and other Asian markets will
react...
This is going to be a "gradual" increase.
How are analysts expecting this to unfold over the coming months and years?
The Fed's policy makers say they expect the short-term rate to stand at around one-point-five
percent by the end of 2016.
They forecast that number to increase to two-point-five percent by the end of 2017,… and will not
get close to normal levels of around 3.5% until 2018
Now that comes on the back of expectations that the economy will improve,… growing
two-point-four percent next year, with the unemployment rate falling to the four percent
range.