US Federal Reserve raises interest rate

NEW YORK

The Federal Reserve increased its benchmark interest rate by 0.25 percent, the Federal Open Market Committee (FOMC) announced Wednesday.

"The labor market has continued to strengthen and that economic activity has continued to expand at a moderate pace," since the Fed's last meeting in February, the committee said in a statement.

The unemployment rate fell to 4.7 percent in February, from 4.9 percent the previous month, while the economy added 235,000 jobs, much more than the 200,000 that was expected.

Nine of the 10 members on the committee voted in favor of raising the range for the federal funds rate to 0.75 - 1 percent, from 0.50 - 0.75 percent.

Only Neel Kashkari, head of the Fed Minneapolis, voted against the decision and “preferred at this meeting to maintain the existing target range for the federal funds rate," the statement read.

It is the third time the central bank has raised rates since June 2016.

"As long as the economy continues to improve as expected, further gradual rate hikes will be appropriate until the fed funds rates reaches its long-run neutral rate of around 3 percent," Fed Chair Janet Yellen said at a press conference after the decision was released.

She said fiscal policy changes could alter the economic outlook, but it is "too early" to tell how the new Donald Trump administration and Congress would change taxes, spending, regulatory policies and how those alterations would affect the economy.

Yellen did not provide a time frame for the central bank's next rate hike but said it "depends on the Fed’s confidence in the economy”.

Trump criticized the Fed and Yellen while he campaigned for president, and said he prefers the federal funds rate to be lower than current levels.

High rates raised the value of the dollar against other currencies, which in turn places downward pressure on the volume of American exports.

The dollar fell against British pound, euro, and Turkish lira following the rate hike. Foreign markets have expected an interest rate hike for the past three weeks and already priced in the bank's decision.

With the dollar’s decline, crude oil prices rose. American benchmark West Texas Intermediate was at $49, and international benchmark Brent crude reached $51.98, before 1830 GMT.