The main reason the Fed had to raise rates because they talked far too long about raising them. It was a face saving event. If they didn't do it, they are all talk, no action.
The second reason is because all of the Feds members, the national banks, needed a larger interest rate spread. This creates a LOT of money for banks. As bank stock prices go up, and bank executives make more money. HELOCs, ARMs, and other loans are adjusted based on the current fed funds rate. There are a lot of loans out there, and a .25% increase in the terms is a huge amount of money.
A third reason is the Fed now pays the member banks an extra .25% (now it's .5%) to leave the banks overnight surplus funds at the Fed. The Banks can deposit their extra money that they have not yet loaned out at the Fed, and get .5% on their money. Risk free. As much as they can put there. Try and get a 1-day rate of .5% for yourself. It's difficult.
It had noting to do with inflation, as we are in a deflationary spiral. Electronics get cheaper, oil gets cheaper, the USD get stronger which makes imported goods even more cheaper, etc.
There is a labor surplus in the USA, and the World, and it is getting worse. We are getting more and more efficient. We create less jobs than we have people to fill them. We import cheaper tech and manual labor. Companies have plenty of workers applying for the jobs they have available, there is no need to raise wages. If wages rise, more technology is produced to eliminate jobs, or more jobs get imported. Or jobs exported.
The stock market may be stagnant for a long time, be ready.
