The Federal Reserve (Fed) raised interest rates by 0.25% (25 basis points) to a range of 1.25% to 1.50%. This is the third 25 basis point rate hike in 2017 and is in-line with forecasts set by Fed officials earlier this year.
- Fed officials forecast that three interest rate hikes are likely in 2018, indicating higher confidence in the U.S. economy. Several economists are estimating that number of hikes could be as high as four with the added growth that may result from tax reform.
- U.S. stocks advanced as the Fed raised its 2018 GDP forecast from 2.1% to 2.5%. Meanwhile, U.S. Treasury yields moved lower despite the Fed’s decision to raise interest rates.
- Inflation remained below the Fed’s 2% 12-month target but is expected to stabilize over the next three to five years. Adjusting for recent hurricane-related fluctuations, job gains increased as the unemployment rate continued to decline.
- Current Fed Governor Jerome (Jay) Powell will succeed Janet Yellen as the next chair of the Federal Reserve in February 2018 following his widely expected confirmation by the Senate. Mr. Powell has supported Ms. Yellen’s cautious stance and gradual pace of interest rate increases, which suggests continuity in monetary policy; however, in contrast to Ms. Yellen, Mr. Powell supports further deregulation in the banking sector.
What does this mean for you?
- We believe investors should be patient and adhere to a well-constructed, diversified investment portfolio anchored to their goals, cash needs and time horizons. Despite elevated uncertainty, such as a new Fed Chair and U.S. monetary policy announcements, we do not find compelling reasons at this time which would justify adjusting our asset allocation methodology.
For further information and assistance, please contact your relationship manager.