Well, it wasn’t unexpected so stocks didn’t plunge. But it is still close to what the financial markets feared.
Today, the Federal Reserve raised its benchmark short term interest rate another 25 basis points to a range of 1.5% to 1.75%.  And forecast a steeper path of hikes in 2019 and 2020. Fed policy member remained divided over the outlook for 2018 with seven Fed officials projecting at least four interest rate increases in 2018 and eight expecting three or fewer.
The Standard & Poor’s 500 and the Dow Jones Industrial Average both finished down 0.18% on the day. (The S&P 500 was ahead for the day until the 2:15 p.m. New York time and the Fed’s announcement.) The yield on the 10-year Treasury edged one basis point lower to 2.88%.
The extent of the shift in attitude at the Fed was best expressed in the “dot plot” that tracks the forecast of Fed policy officials toward future interest rate increases. For 2018 the dot plot showed the virtual elimination of any forecasts for less than two interest rate increases. The bulk of opinion now points to three moves. For 2019 the consensus is pointing to three increases but the dots are moving up the plot to include the possibility of four moves to take rates higher. For 2020 the bulk of forecasts is pointing to three increases.
I’d take the individual moves on the dot plot with a grain of salt but the overall message is clear–this is a Fed that–absent new data–in embarked on a policy to significantly raise interest rates.
In his post-meeting comments new Fed chair Jerome Powell did call out one possible source of news that might change the Fed’s policy: Any slowdown in the economy caused by the Trump administration’s tariff increases.
