That’s nearly a sideshow.
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“Far and away, the most important takeaway from the Fed meeting is their expectations of the velocity of the rate rise”, said Philip Blancato, chief executive at Ladenberg Thalmann Asset Management in NY.
The Federal Open Market Committee is due to conclude its final monetary policy for 2015 this afternoon, with a decision expected at 2 p.m. EDT. “But I think it’s time to start”, said Joseph Gagnon, senior fellow at the institute.
The message is likely to be: Yes, we raised interest rates today, but we will be very slow and cautious going forward.
In the bond markets, Treasury yields rose slightly ahead of the Fed decision and after stable USA consumer price data had reinforced the case for a hike.
Investors want to hear that the Fed is watching these alarming developments and will react to prevent another crisis.
The benchmark federal funds rate is expected to go from 0.25 percent to 0.50 percent. Past surveys show that many economists expected the first hike to be in 2010. There’s speculation on Wall Street that at least two Fed members will dissent this time.
The Dow was up as much as 165 points in early trading, though it has since given up the early gains and was only about 40 points in more recent trading.
“Right now, lower unemployment that boosted wage and price growth would be an affirmatively good thing”.
The fellows believe that the Fed will not be “one and done” and will raise rates several times in 2016. She’s rejected the possibility of returning to the formula the Fed used from 2004 to 2006, when it raised its target for the federal funds rate by a quarter-point at 17 consecutive meetings.
Nine of the 10 major S&P sectors were higher, with the industrial index’s 0.90 percent rise leading the advancers. But the rate affects other borrowing costs and has become a benchmark for savings accounts, certificates of deposit, credit cards, auto loans, small business loans and home equity lines of credit.
Once the initial scan of the statement and charts is done, attention will turn to an analysis of what the Fed thinks the economy’s biggest problems are.
The main concern is that, as with the European Central Bank a couple of weeks ago, the Fed will get cold feet and under-deliver, either with a marginal hike, say from 0-0.25% to 0.25%, or even worse, none at all. Is it still China?
The junk bond fears are exacerbated by the crash in oil prices, which has caused a wave of energy defaults. Or is it the stubborn lack of inflation in the US economy?
A smooth liftoff will be up to a team of traders in the New York Fed’s “operations room”, who on Thursday morning will closely monitor key short-term rates to determine whether markets are cooperating.
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Most Asian stock markets are finishing with big gains as anticipation builds for the Fed’s decision on whether to raise rates after seven years at ultralow levels.
