STOCKS: Major U.S. indexes were mostly higher after the decision, with the S&P 500 .SPX up 0.3% and the Nasdaq .IXIC up 0.7%.
BONDS: U.S. Treasury securities mostly held onto their gains, keeping yields lower. The 2-year yield US2YT=RR, most sensitive to expectations for future Fed policy, was flat at 4.659%. The 10-year yield US10YT=RR was down 4.1 bps at 4.957% and the 30-year yield US30YT=RR was down 4 bps at 5.323%.
FOREX: The U.S. dollar index =USD rose 0.3% to 99.95.
COMMENTS:
Karl Schamotta, chief market strategist, Corpay, Toronto:
"Today’s decisive hike—supported by all FOMC members and paired with an upgrade in the 'dot plot' summary of economic projections—should go a long way toward restoring confidence in the Fed’s commitment to fighting inflation, and help remove a major headwind keeping the dollar restrained."
Kay Haigh, global head and CIO of fixed income and liquidity solutions, Goldman Sachs Asset Management, New York:
“The Fed has signaled it does not at this stage envisage an aggressive tightening cycle. Most FOMC members see a total of two hikes this year per the SEP, and it will likely skip October’s meeting given its proximity to the midterm elections. One more hike this year in December is our base case, although this remains contingent on upcoming CPI reports and the path of energy prices.”
Michele Raneri, vice president and head of U.S. research and consulting, TransUnion, Chicago:
“The Federal Reserve's decision today to raise interest rates by a quarter percentage point reflects its continued focus on addressing persistent inflation. While inflation has moderated from peak levels, it has remained elevated enough to prompt additional action from the Federal Open Market Committee. At the same time, labor market conditions have remained relatively resilient with unemployment rates holding steady in recent months, providing the Fed the confidence to raise rates at this time."
Brian Jacobsen, chief economist, Annex Wealth Management, Menomonee Falls, Wisconsin:
"Is this more like 1994 or 1997? In 1994, the Fed embarked on an aggressive sequence of hikes. In 1997, it hiked once and was done. Given the language about this being a way to support a 'timelier return' to the Fed’s target, I wouldn’t bank on another hike this year. Yes, the median dot shows another hike this year, but a lot can change between now and then.
"Warsh not only read the markets, but he read the room, supporting a rate hike. That’s why we can get a relatively muted response from the markets despite the change in course."
Fed raises rates and signals more tightening
NEW YORK, Sept. 16 (Reuters) - The Federal Reserve raised interest rates on Wednesday and flagged further increases in borrowing costs in coming months, with new U.S. central bank chief Kevin Warsh joining a unanimous decision that effectively acknowledges the Trump administration's inability so far to control inflation.
New policy projections showed 16 of 18 policymakers anticipate at least one more quarter-percentage-point hike by the end of this year, with only two of them seeing rates remaining stable from here. Warsh apparently again did not submit a rate projection.
It's the first policy shift under the new Fed chief, who took office in late May after being selected by Trump with an expectation that he would cut rates.
The Fed's new policy statement and economic projections, to the contrary, show a central bank opening the door on tighter monetary policy through next year, with the policy rate rising to the 4.00%-4.25% range by the end of this year and ending 2027 at the same level.
SPY•
