Federal Reserve increases interest rates for first time since 2006

MINNEAPOLIS, Minn. (KMSP) - The Federal Reserve decided to raise interest rates Wednesday for the first time since the great recession.

It will cost more to borrow money, but since the rate increase is so small most financial experts say it will barely be felt and the move is necessary to maintain a healthy economy.

The Federal Reserve says the U.S. Economy is ready to get off its crutches, after the debilitating depths of the 2008 financial crisis.

“It also recognized the considerable progress toward restoring jobs, raising incomes, and easing the economic hardship of millions of Americans.” Janet Yellen said.

Fed leaders moved to raise the key rate from a 0% to 0.25% to a range of 0.25% to 0.5%. Trader, Tom Tagtmeyer says this move was positively received by the markets, however changes are coming.

“The price of credit is going to go up, so you're going to end up paying more for all of the products where you are currently borrowing money.” Tom Tagtmeyer said.

Consumers will be paying slightly more interest on credit cards and home equity lines. Rates on mortgages and car loans aren't expected to rise right away, but financial advisor Greg Petrie says this could actually spur the economy even more since it gives banks more incentive to lend.

“So we're potentially going to be seeing more money going to small businesses, big businesses, and everything in between.” Greg Petrie said.

Along with a show of confidence in the U.S. Economy, St. Thomas finance professor, David Vang believes the fed also did this as a defensive move.

“Number one fight inflation before it happens, and two give them some policy ammo in the future so we could cut rates it we need to in the future in the event of a recession.” David Vang said.

The central back says rates will remain historically low well into the future.

The Federal Reserve says further rate hikes could happen, but only gradually as the economy continues to strengthen.