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The US Federal Reserve increased by 25 basis points the interest rates on federal funds from 0,25 to 00,50% points and ended the seven-year policy of low interest rates. The markets predicted about 84% likely to happen and their reaction was positive. The major highlights of the event are: the Fed predict for the end of 2016 interest rates to reach 1.375%, which means new four increases in interest rates in 2016. According to the Fed, the economy recorded steady progress, there is still what to expected from the labor market. The current 5% level of unemployment is close to medium-term forecast levels. Net exports are hampered by the strong dollar and the construction of new homes has slowed. Investment in the business have increased and economic risks from abroad has decreased since the summer. The strong dollar and weaker oil have influenced inflation and once these factors weaken, it should reach 2%.
The importance of the first raising of interest rates should not be overestimated, as the Fed acknowledged that it takes time to show the new policy effect. According to Janet Yellen gradually raising of interest rates is needed, faster growth or faster rise in inflation would lead to fast raising of interest rates from the Fed, and that slowing growth and inflation will lead to slowdown the increase.
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