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2nd LD Writethru: U.S. Fed raises federal funds rate by 25bp, first rate hike since 2006

Xinhua, December 17, 2015 Adjust font size:

U.S. Federal Reserve on Wednesday decided to raise benchmark interest rate by 25 basis points, the first interest rate increase since 2006,marking the end of an era of extraordinary easing monetary policy.

Given the considerable improvement in labor market conditions this year and it's reasonably confident that inflation will rise, the central bank decided to raise the target range for the federal funds rate to 0.25-0.5 percent, the Fed said in a statement after concluding a two-day policy meeting on Wednesday.

According to the statement, in light of the current shortfall of inflation from the central bank's 2 percent target, the Fed expects that the developments of economic conditions will warrant "only gradual" increases in the benchmark interest rate.

Fed officials expected the economy will continue to expand at a moderate pace and labor market will continue to strengthen, with the gradual adjustments in the stance of monetary policy.

According to a projection report released on Wednesday, Fed officials expected the U.S. economy will grow 2.4 percent in 2016, slightly higher than their September forecast of 2.3 percent. The unemployment rate will further fall to 4.7 percent in 2016, lower than their September forecast of 4.8 percent. Endit