After weeks of market volatility and calls by President Donald Trump for the Federal Reserve to stop raising interest rates, the U. S. central bank instead did it again, and stuck by a plan to keep withdrawing support from an economy it views as strong.
WASHINGTON (Reuters) – After weeks of market volatility and calls by President Donald Trump for the Federal Reserve to stop raising interest rates, the U. S. central bank instead did it again, and stuck by a plan to keep withdrawing support from an economy it views as strong.
U. S. stocks and bond yields fell hard. With the Fed signaling “some further gradual” rate hikes and no break from cutting its massive bond portfolio, traders fretted that policymakers could choke off economic growth.
“Maybe they have already committed their policy error,” said Fritz Folts, chief investment strategist at 3Edge Asset Management. “We would be in the camp that they have already raised rates too much.”
Interest rate futures show traders are currently betting the Fed won’t raise rates at all next year.
Wednesday’s rate increase, the fourth of the year, pushed the central bank’s key overnight lending rate to a range of 2.25 percent to 2.50 percent.
In a news conference after the release of the policy statement, Fed Chairman Jerome Powell said the central bank would continue trimming its balance sheet by $50 billion each month, and left open the possibility that continued strong data could force it to raise rates to the point where they start to brake the economy’s momentum.
Powell did bow to what he called recent “softening” in global growth, tighter financial conditions, and expectations the U. S. economy will slow next year, and said that with inflation expected to remain a touch below the Fed’s 2 percent target next year, policymakers can be “patient.
