Fed raises interest rates for the first time since 2018

[progree]

Source: Yahoo Finance

The Federal Reserve on Wednesday raised short-term interest rates for the first time since 2018, as high inflation pushes the central bank to pull back on its extraordinary pandemic-era support.

The U.S. central bank lifted its benchmark Federal Funds Rate by 0.25%, to a target range of between 0.25% and 0.50%. The Fed also noted that the economic outlook remains "highly uncertain" in the face of the war in Ukraine.

...

Projections released by the policy-setting Federal Open Market Committee signal the likelihood of the Fed raising rates up to six more times this year (which would mean rates 1.75% higher at the end of this year than last).

The Fed, however, is warning that inflation will not immediately abate in response to its initial interest rate hikes. The central bank now projects prices to rise by 4.3% over the course of 2022, well above the 2.6% pace it had projected in December.

Read more: https://finance.yahoo.com/news/fed-fomc-monetary-policy-decision-march-2022-131719859.html

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The S&P 500 ended up 2.24% for the day (that's equivalent to the DOW up 750 in same-percent terms. The Dow actually closed up 519 points, a 1.55% gain). Stock indices actually fell after the announcement, but rose in the last half hour of trading.

This was a long-expected move. Actually, a rate rise of 0.50% was expected until, uh, Russia decided to, umm, secure its western borders, and put the world economy into turmoil. That dropped expectations of a rate hike to 0.25%. But anyway, I think there was relief that the rate hike wasn't higher.

The last time the Fed raised the Fed Funds rate, as the article mentions, was in 2018. The stock market ended that year down.

More on today's stock market tick tock:

https://finance.yahoo.com/news/stock-market-news-live-updates-march-16-2022-221433948.html

[Bengus81]

1. The Fed raises it 0.25%,let's see what the Credit card companies do with it........

1%-2%??

That small increase on most loans won't slow down inflation a bit but will give CC companies and quickie loan places the wherewithal to harm consumers that can least afford it.

[IronLionZion]

2. As expected

some were hoping for more but that was unlikely because of the Ukraine war and oil prices. Oh well, their next meeting is in May.

[BumRushDaShow]

3. Here is an interesting look back on when they started cutting the rates in 2019

just before the pandemic hit. Might be an indicator on where they plan to go with the rate hikes (and of course we know what happened in 2020 with the extreme shock to markets due to the pandemic)...

When the Fed cuts interest rate three times and pauses, it works out great for stocks, history shows

Published Wed, Oct 30 2019 2:29 PM EDT Updated Thu, Oct 31 20198:21 AM EDT

Maggie Fitzgerald
@mkmfitzgerald



The Federal Reserve just cut interest rates for the third time this year and said it will likely pause from here. That scenario is usually very good for stocks.

(snip)

The central bank’s decision Wednesday to lower the overnight lending rate to a target range of 1.50% to 1.75% marks the third rate cut since July, when the Fed lowered rates for the first time since the financial crisis. Powell has attributed the series of cuts to “the implications of global developments for the economic outlook as well as muted inflation pressures.”

(snip)

Between 1995 and 1996 and in 1998, the Alan Greenspan-led Fed cut interest rates three times and then stopped, in order to combat an economic downturn and sustain the expansion. In each of these cases the S&P 500 returned 24.76% and 19.39%, respectively, over the next year. “We’ve seen periods of economic slowdowns that had three consecutive 25 basis point cuts, most recently in the mid- and late 1990s,” said Ryan Detrick, LPL Financial senior market strategist. “The good news is the economy accelerated after the slowdowns and stocks did quite as well.”

(snip)

Historically, the danger for stocks is when the third cut is not the last and the Fed needs to jolt the economy further. In 2001 and 2007, during the dot-com bubble and the financial recession, the Fed cut interest rates three times and kept cutting in order to boost the economy. During those cutting cycles, the S&P 500 had dropped 12.64% and a stunning 42.37% one year later. So stock investors should be wishing that this is the last rate cut for a while.

https://www.cnbc.com/2019/10/30/when-the-fed-cuts-rate-three-times-and-pauses-history-shows-it-works-out-great-for-stocks.html