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Fed Raises Rates At March Meeting
For the second time in three months, the Federal Reserve increased its benchmark interest rate a quarter point amid rising confidence that the economy is poised for more robust growth.
The move, widely anticipated by financial markets, takes the overnight funds rate to a target range of 0.75 percent to 1 percent and sets the Fed on a likely path of regular hikes ahead. Minneapolis Fed President Neel Kashkari was the sole "no" vote.
Despite a well-telegraphed move, news of the rate hike pushed government bond yields lower while major averages in the stock market moved higher. "The market was bracing for a much more hawkish tone from the Fed. The early reaction looks to be one of relief, that the market's worst fears were averted," said Michael Arone, chief investment strategist at State Street Global Advisors. Some market participants had feared that the statement and accompanying economic projections Wednesday would point to a more hawkish Fed, with a faster pace of rate hikes ahead. However, the closely watched "dot plot" that shows each member's expectations for where rates will be in coming years changed little from the last meeting.
With a higher rate already baked into the market, investors were looking for clues about just how aggressive the central bank will be down the road. The market currently expects the Fed to hike two more times this year, which was in line with the bank's projections from December 2016.
"They met expectations perfectly," said J.J. Kinahan, chief market strategist at TD Ameritrade. "They stayed to the script that Wall Street wanted to hear."
The Fed on Wednesday indicated that it still expects three moves. In its statement, the central bank noted that business investment has "firmed somewhat," a slight upgrade from the characterization of "soft" after the Jan. 31-Feb. 1 meeting.
The market expects the next hike to come in June and another in December. Those probabilities increased a bit following Wednesday's decision. More broadly, though, officials left expectations for economic growth little changed. The forecast for GDP gains in 2017 remains 2.1 percent, while 2018 was pushed up one-tenth to 2.1 percent. Longer-run growth estimates remained at 1.8 percent.
Inflation expectations remained in check as well, as the Federal Open Market Committee — the central bank's policy-setting group — sees a slight uptick in 2017 from 1.8 percent to 1.9 percent but the longer-run tending toward 2 percent.
David is a seasoned real estate professional, specializing in residential sales, rentals and investment properties. David is a 15 year resident of the New Jersey Gold Coast, with the local knowledge n....
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