IN YOUR WALLET - The FED Interest Hike

"What the Fed’s interest rate hike means for your wallet" PBS NewsHour 12/15/2015

Excerpt

SUMMARY:  The Federal Reserve is doing something it hasn't done since 2006, raising interest rates.  The long-awaited announcement by Fed chair Janet Yellen hikes a key short-term rate from near zero.  For a closer look at how the Fed made its decision, Gwen Ifill talks with David Wessel of the Brookings Institution and Tara Siegel Bernard of The New York Times.

GWEN IFILL (NewsHour):  Now, up it finally went.  The long-awaited and long-predicted interest rate hike was announced today by the Federal Reserve.

This afternoon in Washington, Fed Chair Janet Yellen explained economic conditions were ripe for the increase.

JANET YELLEN, Chair, Federal Reserve Chair:  The underlying health of the U.S. economy, I consider to be quite sound.  I think it’s a myth that expansions die of old age.  I do not think that they die of old age.  So, the fact that this has been quite a long expansion doesn’t lead me to believe that its one that has — its days are numbered.

GWEN IFILL:  For a closer look at today’s rate hike, both in terms of how the Fed makes its decisions and what this move might mean for your average household budget, we turn to David Wessel, director of the Hutchins Center on Fiscal and Monetary Policy at The Brookings Institution, a nonpartisan research center, and contributing correspondent to The Wall Street Journal; and Tara Siegel Bernard, personal finance reporter at The New York Times.

David, welcome.

So, tell me.  We have been talking about this for a long time.  And as you just heard her talk about the long expansion, what took so long for them to finally make such an incremental move?

DAVID WESSEL, Brookkings Institution:  You sound impatient, Gwen.

(LAUGHTER)

GWEN IFILL:  Well, I think that the Fed has figured that interest rates needed to be low for a very long time because the economy was very slow to recover from a devastating recession, and because part of their strategy is to get inflation to a 2 percent target.  And they’re still not there.

So there was no reason to rush.  And now they have decided the economy is healthy enough for them to just to begin to lift their foot gradually off the accelerator.