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The US Federal Reserve announced a rate hike in December. It is expected that "further gradual increases" in the key interest rates would be appropriate, says the commentary on the interest rate decision. The risks for the economic outlook are balanced. The economy is growing at a fast pace, writes the Fed. The job market is strong and the unemployment rate has dropped. The comment on the interest rate decision has changed very little compared to the last meeting on 16 September.
"A statement by the Fed in line with expectations," commented Thomas Altmann, Portfolio Manager at QC-Partners. The Fed remains on track to raise interest rates. "Unless something unforeseen happens, the Fed will turn the interest rate screw on next December." For investors, there is "absolutely no surprise".
More exciting will be, as it will continue in the next year. Recent Fed statements should raise interest rates at least to a neutral level, which will neither support nor slow down the economy. The central bank sees the interest rate neutral around three percent. What happens next is considered open. Some central bankers, including Fed Chairman Jerome Powell, are advocating interest rate hikes that could at least go beyond neutral levels.
The recent harsh criticism of US President Donald Trump at the Fed has so far apparently not impressed FedB Powell. Trump had described monetary politicians as "crazy" and threatening the US economy. It is not clear if Trump will soften his rhetoric after the congressional elections.
The euro fell slightly after the decision and hit a daily low of 1.1370 USD. US government bond prices fell slightly. The US stock market has hardly reacted.
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