Report: Strong job market, rising inflation pushed Fed to raise rates

A monitor on the floor of the NYSE broadcasts the press conference of Fed Chair Janet L. Yellen on Dec. 14, after the central bank voted to raise key interest rates for the first time in 2016. The Federal Reserve viewed a strong labor market and growing gross domestic product as motivating factors to implement the quarter-point hike. Photo by John Angelillo/UPI

WASHINGTON, Jan. 4 (UPI) — The U.S. central bank on Wednesday detailed their policy meeting last month, at which it raised key interest rates for the first time in a year.

The Federal Reserve announced Dec. 14 that it had raised the federal funds rate by another quarter-point, its first hike since December 2015. Improving economic indicators motivated the decision, the Fed’s minutes report said Wednesday.

The minutes cited as factors a growing gross domestic product and a strong labor market — and inflation, which had increased but remained the panel’s 2 percent goal.

“Payroll employment increased at a solid pace in October and November, and the unemployment rate declined, reaching 4.6 percent in November,” the report said Wednesday.

“U.S. economic data and Federal Reserve communications reinforced market participants’ expectations for an increase in the target range for the federal funds rate at the December meeting,” it added. “After assessing the outlook for economic activity, the labor market, and inflation, members agreed to raise the target range for the federal funds rate to 1/2 to 3/4 percent.”

The decision to raise rates followed 12 months of leaving them alone. In December 2015, the increase from near zero was the Fed’s first in years.

“At this meeting, members continued to expect that, with gradual adjustments in the stance of monetary policy, inflation would rise to the Committee’s 2 percent objective over the medium term,” the report states.

All 10 members of the policy-making Federal Open Market Committee voted for the rate increase, the minutes showed.

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