As expected, the Fed did raise the Fed Funds rate by a quarter of a point. The rate now sits at 2%-2.25%. The other interesting thing about today’s Fed statement is the removal of the term “accommodative”. The Fed finally feels that they have removed themselves from an accommodative stance and now are nearing a more neutral monetary policy position. Stocks rallied a little on the news then reversed course and dipped into red as the last hour of trading unfolded.
By the close, the Dow Jones Industrial Average was down 106 points to finish the day at 26,385. The S&P 500 was down 9 points to close at 2,905. Gold was down $6 to trade at $1,198 per ounce, while oil was down $.67 to trade at $71.61 per barrel WTI.
The Fed appears to feel that the economy is strong enough and that their path to higher rates will remain intact, with one more rate hike this year and three rate hikes likely in 2019. Of course, they always leave room to change course should economic conditions warrant, but the more bullets(rate hikes) they can stuff into the chamber before accommodation would be once again needed, the better. Market volatility is not unusual on Fed announcement days and today was no exception. Let’s see how the next couple of days play out and which way things break once the Fed comments sink in.
Have a nice evening everyone.