US Fed to raise base rate in March: what does it mean

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The Federal Reserve is ready to raise the interest rate in mid-March, which is much earlier than investors expected.

This statement was made by Fed Chairman Janet Yellen in Chicago, who noted that the rate could be raised if economic data on the state of the labor market and inflation continue to remain at an acceptable level.

“Overall, prospects for continued modest economic growth look encouraging, in part due to some reduction in risks coming from abroad,” Yellen said.

Stanley Fischer, vice chairman of the Fed, conveyed the same message at the same time at a conference in New York. “We've seen a lot of significant changes in a relatively short period of time,” he said, referring to economic changes since the election.

The rate hike may increase tensions with the White House, which wants to stimulate economic growth by reducing taxes, reducing regulation, increasing defense capability and spending on infrastructure.

Implications for Americans

The proposed Fed move has modest short-term implications for consumers. Interest rates on car loans and some types of credit card debt will rise, but will remain low by historical standards. Rates on 30-year mortgage loans rose by about half a percentage point from last year.

Fed officials have come to the conclusion that monetary policy cannot ensure higher growth rates. The job of the Fed is to minimize unemployment and moderate inflation. Unemployment at 4,8% in January, Fed officials regard as healthy, and prices rose by 1,9% over 12 months, which reminds 2012 the year when inflation was 2%.

In December, the Fed raised the interest rate a second time after the financial crisis, ranging from 0,5% to 0,75%, and predicted 3 increases in 2017.

The committee plans to meet in Washington on March 14 and 15.

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