Banking

As promised, the Federal Reserve’s monetary policy committee raised interest rates by a quarter of a percentage point at its March 15 meeting. Chair Janet Yellen had suggested the hike would be appropriate if economic markers—in particularly GDP rates, jobs, and consumer spending—improved over a slight slump from at the start of 2017 determined to be mostly ‘transitory.’

On December 14, 2016, the Federal Reserve boosted its benchmark interest rate by 25 basis points to a range of 0.5 percent to 0.75 percent. While this is still incredibly low by historical standards, it is notable because it’s only the second time since the financial crisis of 2008 that the Fed has raised this rate.

The move continues to support economic growth and sustains a friendly environment for borrowing and risk-taking. It also recognizes that the U.S. is enjoying strong employment and price stability, and healthy inflation, as well as positioning the economy to ride the expected acceleration that will occur as a result of the new Trump administration.

The last time the Federal Reserve increased rates was 2006. After predictions and discussion of a rising rate environment for a while, a unanimous vote brought the interest rate up a quarter-point this past week. While Chairman Janet Yellen says that future rate hikes will “come slowly” and such a minimal increase is unlikely to move the needle much, it warrants community banks taking the time to consider how it will impact balance sheets – in light of how it will influence customer behavior.