Olde Hornet
Well-Known Member
https://us.etrade.com/knowledge/mar...and-insights/fed-lifts-benchmark-rate?em=4491
The Fed makes a move for a second time in three months
At its policy meeting on March 15, 2017, the Federal Open Market Committee (FOMC) increased the benchmark interest rate, known as the federal funds rate, by 0.25%, or 25 basis points. The rate is now 0.75–1.00%, or 75–100 basis points (a basis point is one one-hundredth of a percent).
The Federal Reserve (the Fed) cited healthy economic growth, a steadily expanding labor market with wage growth, and a continued pickup in inflation as reasons for the increase. The rationale is in line with comments from Fed committee members prior to the meeting.
This move, which follows the 0.25% increase in December 2016, suggests the Fed could be on its way to normalizing interest rates after keeping them low due to the financial crisis and the slow rebound thereafter. The Fed’s recent actions speak to the continued improving health of the economy overall, while maintaining modest core inflation.
What could this mean for markets?
The road to this increase has been winding indeed. Market participants initially appeared undecided about whether the Fed would move. But expectations for an increase shifted dramatically following the release of the Fed’s January 31–February 1 meeting minutes and gathered momentum on comments from Fed officials focusing on labor market expansion, wage growth, and target core inflation as key to their decision making. It may take some time for investors to acclimate to the news, which some market observers believe could result in higher volatility.
The Fed makes a move for a second time in three months
At its policy meeting on March 15, 2017, the Federal Open Market Committee (FOMC) increased the benchmark interest rate, known as the federal funds rate, by 0.25%, or 25 basis points. The rate is now 0.75–1.00%, or 75–100 basis points (a basis point is one one-hundredth of a percent).
The Federal Reserve (the Fed) cited healthy economic growth, a steadily expanding labor market with wage growth, and a continued pickup in inflation as reasons for the increase. The rationale is in line with comments from Fed committee members prior to the meeting.
This move, which follows the 0.25% increase in December 2016, suggests the Fed could be on its way to normalizing interest rates after keeping them low due to the financial crisis and the slow rebound thereafter. The Fed’s recent actions speak to the continued improving health of the economy overall, while maintaining modest core inflation.
What could this mean for markets?
The road to this increase has been winding indeed. Market participants initially appeared undecided about whether the Fed would move. But expectations for an increase shifted dramatically following the release of the Fed’s January 31–February 1 meeting minutes and gathered momentum on comments from Fed officials focusing on labor market expansion, wage growth, and target core inflation as key to their decision making. It may take some time for investors to acclimate to the news, which some market observers believe could result in higher volatility.
