For the first time since 2006, the Fed has raised short-term interest rates, marking an end to a seven-year period in which the Fed held such rates near zero.
The decision, unanimously decided upon, had long been anticipated to pass after Fed officials including Chairwoman Janet Yellen had hinted that the central bank would raise interest rates after keeping it near zero (a decision made in December 2008) to help nurse the economy back to health, according to MarketWatch.
With an approved quarter-point increase in its target funds rate, starting Thursday the new target will go from 0 to 0.25 percent to 0.25 to 0.5 percent. To set this new baseline, the Fed said it would pay banks an interest rate of 0.5 percent on unused money and would borrow up to $2 trillion of securities that will be used in overnight trading at a rate of 0.25 percent.
Under these new rates, savers can expect to see higher returns. Conversely, students, as well as new homeowners and new car buyers, can expect to see higher borrowing rates, according to ABC News.
Making this decision, the Fed cited job strength growth and a steady economic expansion, illustrating a vote of confidence in the U.S. economy at a time when much of the rest of the global economy continues to struggle, according to The New York Times.
In a statement, the Federal Open Market Committee said that it "currently expects that, with gradual adjustments in the stance of monetary policy, economic activity will continue to expand at a moderate pace and labor market indicators will continue to strengthen. Overall, taking into account domestic and international developments, the Committee sees the risks to the outlook for both economic activity and the labor market as balanced. Inflation is expected to rise to 2 percent over the medium term as the transitory effects of declines in energy and import prices dissipate and the labor market strengthens further. The Committee continues to monitor inflation developments closely."
U.S. markets were in positive territory following the Fed's decision.
