For the very first time in 2017 and the second time in a decade, the United States Federal Reserve on Wednesday voted to raise interest rates. This is the second hike in rates since the global economic recession of 2008, with the first hike coming in December 2015.
The committee took the rate to zero percent during the financial crisis of 2008.
In a statement released at the end of the rate-setting meeting, the Federal Reserve said it would raise the rate on federal-funds rate by a quarter percentage point, to between 0.50 percent and 0.75 percent, a move that would raise borrowing costs of virtually every fund in the US economy.
“The stance of monetary policy remains accommodative, thereby supporting some further strengthening in labor-market conditions and a return to 2% inflation,” the statement read.
“In view of realized and expected labor market conditions and inflation, the committee decided to raise the target range. Job gains have been solid in recent months and the unemployment rate has declined”.
The Fed added that it may raise the rates about three times in 2017, as the US economy gets stronger.
The hike has immediately led to a stronger dollar, pushing the global currency to a 10-month high, directly hurting the naira, which has become much weaker to the dollar.
The naira opened at the interbank market at N315/$1, and has depreciated to the strong dollar to trade at N316.25/$1. The parallel market is yet to react to the rate hike, as dollar still trades at N485.
Pound sterling was down 0.5 percent against the stronger dollar at $1.2596, undoing an early rise that followed the release of UK labour market data.
The dollar was also one percent up, against the Japanese Yen, which rallied after Donald Trump’s victory.