The U.S. Federal Reserve has upped the ante on the federal funds rate for a second time within half a year and moved the upper benchmark by 0.25 points to a 1 to 1.25 percent target area. A two-day policy meeting by the Federal Open Market Committee ended on Wednesday.
In March, the Fed had already moved the benchmark up 0.25 points to between 0.75 and 1 percent. It was only the third hike since Fed chair Janet Yellen had ended the flatline interest rate policy that followed the severe financial crisis which broke out 10 years ago.
Following the outbreak of the crisis in 2007 the federal funds rate swirled downwards from 5.25 percent in August 2007 to 0.25 percent in December 2008, in order to stimulate the markets after the ferocious crash. There it stood for 7 meager years while the economy recovered slowly.
In December 2015, after Yellen had been in office for two years, the first tentative steps were taken to tighten the money tap just a little. In fact, the Fed doesn't set one figure but proposes a margin of 0.25 percentage points (e.g. 1 to 1.25) in which the effective funds rate floats on a day-to-day basis.
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