Fed rate rise marks the end of an era
Christopher Mahon (pictured), Director of Asset Allocation Research at Baring Asset Management, comments on the Fed’s decision to raise rates…
Today's hike marks the end of an era. Rarely has a monetary policy decision been so anticipated by so many for so long. The decision by the FOMC also reaffirms the strength of the US economy.
Expect the Fed to be watching the market’s reaction closely. They are terrified of making a policy error, and will need time to assess how today's decision impacts both the real economy and the market. This means they are likely to proceed very slowly and cautiously.
The Fed's caution means there is a difference between moving gently off the emergency rate of 0% and the withdrawal of liquidity that comes with a true rate hiking cycle. What we have seen today is not the Fed taking away the punchbowl but instead a very mild watering down of the liquor itself. But make no mistake: that liquor is still potent. The rates are still exceptionally low and monetary policy is still being set with a view to encourage growth, not rein growth in