The Federal Open Market Committee raised its benchmark interest rate by 25 basis points on Wednesday, lifting the federal funds rate target range to 3.75%-4.00% in the first rate hike in more than three years. All 12 voting members backed the increase, which the committee said is intended to tamp down demand and rein in inflation that has exceeded its 2% goal for more than five years, backing up the FOMC's pledge to deliver price stability. The Federal Reserve described the economy as expanding at a solid pace with resilient domestic spending, though it said uncertainty remained elevated in part from geopolitical developments, and noted that productivity growth is strong, capital investment is robust, job gains have kept pace with the workforce, and the unemployment rate has changed little. David Alton Clark, Investing Group Leader for Retirement Income Warrior, said he does not expect the widely anticipated move to shift markets, and that attention will focus on how Fed Chair Warsh characterizes the hike, with Clark leaning toward one-and-mum messaging. Clark added that with higher bond market rates and rising oil prices raising the odds of higher inflation ahead, the Fed was painted into a corner, and he does not believe the hike is called for or will solve present issues; Warsh did not participate in the dot plot, which shows members looking for one more hike.
FOMC raised the federal funds rate target range by 25bp to 3.75%-4.00%, lifting the policy rate itself.
The Fed hike and the dot plot pointing to one more increase push bond yields higher, so the 10Y yield rises (bond prices fall).
