Market update: Federal Reserve hikes short-term rates by 0.25% (26 September 2018)

The Federal Reserve increased short-term interest rates on Wednesday, as expected, raising the fed funds target range by 25 basis points to 2.00-2.25%.

• Fed hikes interest rates, raises its economic outlook and drops 'accommodative' language
• Fed's Powell: Lack of 'accomodative' language a sign policy inline with expectations

Stocks were up modestly ahead of the release of the Fed's decision, which crossed the wires at 2:00 PM ET, and extended gains after the central bank removed the word 'accommodative' from its policy statement. However, that initial move was reversed, and then some, following a post-decision press conference from Fed Chairman Jerome Powell, during which he said the language change didn't signal a change in the Fed's path for rate hikes.

The S&P 500 was up as much as 0.5% on Wednesday but fell sharply in the final minutes of the session to finish with a loss of 0.3%. The tech-heavy Nasdaq Composite ended lower by 0.2%, the blue-chip Dow Jones Industrial Average finished lower by 0.4%, and the small-cap Russell 2000 lost 1.0%.

As for rate-hike projections, the Fed still appears to be on track to raise rates another 25 basis points in December, with the CME FedWatch Tool putting the chances at 79.2%. Beyond 2018, the Fed's dot plot showed expectations for three rate hikes in 2019 (unchanged from June) and one in 2020 (also unchanged from June).

U.S. Treasury yields fell following the Fed's policy announcement, although the 2-yr yield managed to close unchanged at 2.83%. The yield on the benchmark 10-yr Treasury note dropped four basis points to 3.06%. In currencies, the U.S. Dollar Index finished +0.2% at 93.90, but was volatile after the release.

The drop in Treasury yields weighed on the rate-sensitive financial sector, which finished at the bottom of the sector standings with a loss of 1.3%. The energy sector (-1.0%) was another notable laggard, dropping in tandem with the price of crude oil; WTI crude futures finished -1.0% at $71.58/bbl.

Market update: Federal Reserve hikes short-term rates by 0.25% (13 December 2017)

• As expected, the Fed decided to raise the fed funds target range by 25 basis points on Wednesday to 1.25%-1.50%. The central bank also released projections for future interest rates, which showed that the median FOMC member still anticipates three rate hikes in 2018 and two in 2019--unchanged from the projections released in September.
• Charts 2 days later:

As expected, the Federal Open Market Committee raised the fed funds target range by 25 basis points to 1.25%-1.50% on Wednesday, marking the third rate hike of 2017. Chicago Fed President Evans and Minneapolis Fed President Kashkari--the FOMC's two most dovish members--dissented, saying they preferred to keep the target range unchanged.

The Fed's so-called "dot plot" revealed that the median FOMC member still anticipates three rate hikes in 2018 and two in 2019. Both figures were unchanged from the projections released in September, even though the central bank acknowledged that overall inflation and core inflation have declined this year and are running below 2.0%.

U.S. Treasuries rallied in a curve-flattening trade, underpinned by both the Fed's policy statement and a smaller-than-expected increase in the core Consumer Price Index for November (+0.1% actual vs +0.2% Briefing.com consensus). The yield on the benchmark 10-yr Treasury note tumbled five basis points to 2.35%, while the 2-yr yield slipped two basis points to 1.79%.

The flattening of the yield curve weighed heavily on the financial sector, which is second only to technology in terms of weight, representing nearly 15.0% of the broader market. The financial space dropped 1.3%, mitigating gains registered in most other areas.

In total, seven of eleven sectors finished in the green, but gains were limited; no group advanced more than 0.5%.

Market update: Federal Reserve hikes short-term rates by 0.25% (15 March 2017)

• The Federal Reserve followed through on its well-telegraphed intention to raise interest rates on Wednesday, hiking short-term rates by 0.25%, or 25 basis points. The new target for the fed funds rate is 0.75% to 1%.
• The policy statement cited the strengthening labor market and improving economy as reasons for the hike. But it noted the pace of expansion is just “moderate.”

More notably, the Fed still believes that three rate hikes are appropriate for 2017, relieving investors' fears that the central bank could begin setting the groundwork for a fourth hike. The major averages started the day in the green thanks to a bullish sentiment in the crude oil market and climbed to new session highs in the afternoon following the FOMC decision.