On December 14, the Federal Open Market Committee (FOMC) announced that it had voted unanimously to raise the target range for the federal funds rate by 25 basis points to 0.5 to 0.75 percent – marking only the second rate hike since the financial crisis. According to a statement released by the FOMC, Committee members attributed the increase to consistent economic growth, in particular strong job gains, throughout 2016. Projections released yesterday include accelerated growth over the next few years, which suggest a series of additional rate hikes throughout 2017. The Committee continued to stress, however, that future rate hikes will “depend on the economic outlook as informed by incoming data.” A transcript of Fed Chair Yellen’s press conference opening remarks can be found here.
As part of implementing the rate hike, the Federal Reserve Bank of New York, effective December 15, will conduct overnight reverse repurchase operations at an offering rate of 0.50 percent, with a per-counterparty limit of $30 billion per day. The regional bank’s Open Market Trading Desk estimates approximately $2 trillion of Treasury securities in its account will be available for these operations.