Markets near certainty of FOMC rate hike in March

The Federal Open Market Committee concluded its meeting with the announcement that the Fed will raise interest rates by 25 basis points to 1%.

"The Committee expects that, with gradual adjustments in the stance of monetary policy, economic activity will expand at a moderate pace, labor market conditions will strengthen somewhat further, and inflation will stabilize around 2 percent over the medium term", the FOMC wrote in a statement".

However, the dollar movement is also expected to strengthen after USA rates, but it weakened against a basket of currencies soon after the announcement.

But we'll get more details on the bank's line of thinking when chair Janet Yellen delivers a speech starting at 2:30 p.m. eastern time today.

The move has been telegraphed for months, as bond yields have been inching higher in anticipation of the move since last week.

It is only the third time rates have been hiked since the 2008 financial crisis and comes as the world's biggest economy sees steady economic and jobs growth. The Fed's key metric for watching price increases- the US price index for personal consumer spending, excluding energy and food costs - hit 1.7 percent in January, not far off from the Fed's target of 2 percent.

However, Kelly thinks the "dovish" Fed should move faster, raising rates at "every noncrisis meeting they have this year".

Backing the United States rate hike were encouraging economic numbers.

The Fed has now raised rates three times since the end of 2015.

The Federal Reserve gave the go ahead to a much-anticipated rate hike Wednesday afternoon.

Tax reform and an infrastructure investment package are often mentioned as policy changes on President Donald Trump's list of priorities that could effect economic growth and, consequently, the Fed's interest-rate decisions.

The rate rise comes after strong jobs figures this week, which saw the U.S. economy add a better-than-expected 235,000 new positions in February.

"Today's decision. does not represent a reassessment of the economic outlook or of the appropriate course for monetary policy", she noted in her first post-policymaking press conference since Trump took office. Stock markets are booming, as are measures of consumer and business confidence.

Kiplinger is forecasting three quarter-point rate hikes in 2017. If the Fed is indeed behind the curve and is forced to increase the pace of hikes, it could see a sharp reversal in both equities and house prices.

  • Larry Hoffman