As expected, the Fed opted to raise rates 25bps from 0.50% to 0.75%, the second rate hike since liftoff in December 2015. Furthermore, the Committee continues to expect a “gradual” pathway for future monetary adjustments.
Bottom Line: The Federal Reserve increased interest rates as expected. The dot plot, furthermore, showed a minimally faster pace of tightening in the near-term with an expected three rate hikes next year, as opposed to two projected in September. More importantly, however, the Fed’s longer-run outlook for growth and inflation was unadjusted, leaving the longer-term pathway for rates little changed. In other words, the Committee sees the potential for a modest uptick in prices and activity over the next 12-24 months. But in the long-run, the Fed’s forecast for a moderate (read: blah) trajectory of the economy remains. Despite the market’s more optimistic view with pro-growth policies potentially ushered in next year, the Fed expects to maintain a slow and “gradual” pace.
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