Thursday, 22 March 2018

Markets fall as Fed raises rates

Markets fell on Wednesday.

The S&P 500 fell 0.2 percent, the STOXX Europe 600 fell 0.2 percent and the Shanghai Composite fell 0.3 percent.

Weighing on markets on Wednesday was the Federal Reserve monetary policy meeting, which concluded with a decision to raise the federal funds rate by 25 basis points to between 1.5 percent and 1.75 percent.

In its statement following the meeting, the Fed said “the economic outlook has strengthened in recent months” while noting that household and business fixed investment “have moderated from their strong fourth-quarter readings.”

Fed officials forcast three rate hikes this year, the same forecast as in December, but they increased the expected number of rate hikes over the following two years.

New Fed chairman Jerome Powell said at the press conference after the meeting that he thought some asset prices are high.

“In some areas, asset prices are elevated relative to their long run historical norms,” said Powell. Among these assets are equities and some commercial real estate prices but not housing.

Powell added that he did not see any significant risks in the current financial system.

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