Page 25 - ARUBA TODAY

BUSINESS Thursday 16 March 2017
A25

Fed raises rate and sees more hikes as US economy improves

MARTIN CRUTSINGER a rate hike,” Vitner said. “I
AP Economics Writer think they’re confident, but
WASHINGTON (AP) — The it’s hard not to be cautious
Federal Reserve has raised after we’ve had so many
its benchmark interest rate shocks over the years.”
for the second time in three Stock prices rose and bond
months and forecast two yields fell as traders react-
additional hikes this year. ed to the Fed’s plans to
The move reflects a con- raise rates gradually. The
sistently solid U.S. economy Dow Jones industrial av-
and will likely mean higher erage, which had been
rates on some consumer only modestly positive be-
and business loans. fore the decision was an-
The Fed’s key short-term nounced at 2 p.m. Eastern
rate is rising by a quarter- time, closed up 112 points.
point to a still-low range of The Fed’s statement made
0.75 percent to 1 percent. few changes from the last
The central bank said in a one issued Feb. 1. But it did
statement that a strength- note that inflation, after
ening job market and rising lagging at worrisomely low
prices had moved it closer levels for years, has picked
to its targets for employ- up and was moving near
ment and inflation. the Fed’s 2 percent target.
The message the Fed sent Federal Reserve Chair Janet Yellen’s news conference appears on a television screen on the floor And it adopted some new
Wednesday is that near- of the New York Stock Exchange, Wednesday, March 15, 2017. The Fed’s key short-term rate is language hinting that it
rising by a quarter-point to a still-low range of 0.75 percent to 1 percent.
ly eight years after the (AP Photo/Richard Drew) might be tolerant of high-
Great Recession ended, er-than-optimal inflation for
the economy no longer rise soon, though only mod- announcing that they were the next rate hike. The lack some unspecified period.
needs the support of ul- estly. Those rates are based raising their prime lending of specificity gives the Fed Economists said this sug-
tra-low borrowing rates on benchmarks like banks’ rate from 3.75 percent to 4 flexibility in case forthcom- gested that officials could
and is healthy enough to prime rate, which moves in percent. ing elections in Europe or let inflation top their 2 per-
withstand steadily tighter tandem with the Fed’s key Mark Vitner, an economist other unseen events disrupt cent target, just as inflation
credit. Neel Kashkari, presi- rate. at Wells Fargo, noted that the global economy. remained stuck below 2
dent of the Fed’s regional After the Fed’s announce- the Fed’s statement provid- “They don’t want to pre- percent for years after the
bank in Minneapolis, was ment, major banks began ed little hint of the timing of maturely set the table for Great Recession.q
the dissenting vote. The
statement said Kashkari Average Wall Street bonus rises slightly to $138,210
preferred to leave rates
unchanged. KEN SWEET levels they were in their dollars for low-level support ment since 2008. Industry-
The Fed’s forecast for fu- AP Business Writer heydays before the finan- staff, while high-profile trad- wide profits in New York
ture hikes, drawn from the NEW YORK (AP) — The aver- cial crisis, when the aver- ers and investment bankers State were $17.3 billion, the
views of 17 officials, still age Wall Street banker bo- age bonus reached as can bring in bonuses in the highest annual profit for the
projects that it will raise nus came to slightly more high as $191,360 in 2006. tens of millions of dollars. industry in New York state
rates three times this year, than $138,000 in 2016, ac- While most Wall Street Roughly 177,000 people since 2012. Bigger profits
unchanged from the previ- cording to data from the bankers make a salary, were employed by Wall for the industry are typically
ous forecast in December. New York State Comptrol- the vast majority of their Street securities and broker- good for New York, since
But the number of Fed of- ler’s Office. compensation comes in age firms in 2016, according the state is heavily reliant
ficials who think three rate The major banks set aside the form of annual bo- to the Comptroller’s office, on Wall Street profits for tax
hikes will be appropriate for $23.9 billion for bonuses nuses which reflect how the highest level of employ- revenue.q
2017 rose from six to nine. in 2016, or $138,210 per the firm did that year, plus
The central bank’s outlook worker, up 2 percent from the worker’s contribution.
for the economy changed a year earlier. Bonuses re- Some bonuses can be as
little, with officials expect- main well below than the small as a few thousand
ing growth of 2.1 percent
this year and next year be-
fore slipping to 1.9 percent
in 2019. Those forecasts are
far below the 4 percent
growth that President Don-
ald Trump has said he can
produce with his econom-
ic program.
The Fed’s rate hike should
have little effect on mort-
gages or auto and student
loans. The central bank
doesn’t directly affect
those rates, at least not in
the short run. But rates on
some other loans — nota-
bly credit cards, home eq-
uity loans and adjustable-
rate mortgages — will likely