As expected, the Federal Reserve raised interest rates for the first time this year today.
Unexpectedly, the Fed’s dot plot shows that Fed members now see three additional interest rate increases in 2017 instead of the two the financial markets had expected ahead of the meeting of the central bank’s Open Markets Committee.
On the news the Standard & Poor’s 500 stock index closed the day down 0.81% and the Dow Jones Industrial Average dropped 0.6%
The Open Markets Committee’s  decision was unanimous for the first time since July. After the increase the very short-term federal funds rate–the overnight lending rate between banks–stands at 0.5% to 0.75%. The committee next meets on February 1 although that meeting isn’t currently scheduled to include a press conference. (The Fed likes to reserve changes in interest rates for meetings with a press conference. The next meeting with a press briefing is scheduled for March 15.)
The Bloomberg Dollar Spot Index, which tracks the dollar against a basket of major currencies, climbed 1.1% today. The yield on the 10-year U.S. Treasury climbed 10 basis points to 2.57%.
The move puts the Federal Reserve out of step with the in-coming Trump administration. During the campaign candidate Trump accused the Fed and its chair Janet Yellen of keeping interest rates low to help Democrats. Now with the incoming administration talking up the need for fiscal stimulus to increase economic growth, the Fed is worried about rising inflation.
