(March 21 – 14:15 ET) – The U.S. Federal Reserve Board met market expectations this afternoon with the announcement of a 25 basis point hike in U.S. interest rates.
The Fed hiked both the Fed funds rate and the discount rate, noting that economic conditions for both remain essentially the same.
Some traders feared that the Fed would deliver an extremely hawkish comment, signalling numerous rate rises on the horizon. The statement seems to indicate that the Fed recognizes the lack of inflation but remains concerned that the conditions are out there which could foster it.
“The Committee remains concerned that increases in demand will continue to exceed the growth in potential supply, which could foster inflationary imbalances. It believes the risks are weighted mainly toward conditions that may generate heightened inflation pressures in the foreseeable future.”
Market reaction has been muted. The Dow has held its level, while the Nasdaq slipped slightly and then held its levels.