The FOMC raises rates by 25bps

The FOMC has just raised rates for the first time in 9 years. The Fed Funds target range has been raised by 25 basis points to 0.25% to 0.5%. The move is seen as a “dovish hike”, if such a thing is possible…

rates up

Fed dot plot has been kept as it was for 2016 but for 2017 the average has been brought back by around 25 basis points from the September meeting. The impact of this is that this is seen as being cautious on future hikes.

Dec dots

The statement was seen as being slightly cautious “The Committee expectsthat economic conditions will evolve in a manner that will warrant only gradual increases in thefederal funds rate; the federal funds rate is likely to remain, for some time, below levels that are expected to prevail in the longer run.”

The Fed’s projections for inflation have been slightly lowered and the committee still does not think that its Personal Consumption Expenditure inflation indicator will return to the 2.0% target rate until 2018.

economic projections

The decision was unanimous


The impact on markets has been fairly muted which would suggest that markets are fairly happy with the decision. Slight declines on EUR/USD and gold have been unwound.

Now over for the press conference to add meat to the bones…