The Federal Reserve raised the interest rate Wednesday for the first time in almost a decade. The .25 percent bump, which was approved by a vote today, is indicative of the agency's confidence in the economy.
"I feel confident about the fundamentals," Federal Reserve Chair Janet Yellen said after the vote. "We have been concerned about the risks from the global economy. Those risks persist, but the U.S. economy has shown considerable strength."
The stock market reacted positively to the increase, with the Dow Jones Industrial average surging up 200 points after the announcement.
The change in the Fed's benchmark interest rate could ultimately affect the interest rates on various financial products and services, including credit cards, loans, and savings accounts. Home financing could also be affected, with rates increasing for home mortgages, thereby likely reducing the number of people who would qualify for a loan.
Here's more from the Fed, issued via press release, on the reasoning behind today's vote:
The Committee judges that there has been considerable improvement in labor market conditions this year, and it is reasonably confident that inflation will rise, over the medium term, to its 2 percent objective. Given the economic outlook, and recognizing the time it takes for policy actions to affect future economic outcomes, the Committee decided to raise the target range for the federal funds rate to 1/4 to 1/2 percent. The stance of monetary policy remains accommodative after this increase, thereby supporting further improvement in labor market conditions and a return to 2 percent inflation.