TEMPO.CO, Jakarta - The US Federal Reserve has decided to raise its benchmark interest rate or the Fed Funds Rate (FFR) by 0.25 percent. This is the FFR's second increase in a span of ten years.
The Fed has room to increase its key rate by 0.5-0.75 percent, citing strengthening economic growth and improving employment. However, the US central bank expects the economy to only need gradual increases of interest rates in the short term.
Fed governor Janet Yellen said their economic outlook is still highly uncertain and the rise was only a modest shift, the BBC reported.
Nevertheless, there are possibilities that the FFR will rise at a faster pace next year once Donald Trump takes office, since the US president-elect has promised to boost the American economy through tax cuts, spending, and deregulations.
Yellen said it would be wrong to speculate on Trump's economic strategies without knowing the details. But she added that the FOMC took into account Trump's possible economic policies when determining the interest rate hike, including the increase in government spending.
As a consequence, the FFR is expected to increase by three times next, two of which are predicted to happen in September.
The Fed announced that the FFR may rise 1.4 percent in 2017; 2.1 percent in 2018; and 2.9 percent in 2019.
BBC | GHOIDA RAHMAH
