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The Fed's Dovish Rate Hike

Perspectives» |

December 21, 2018

In what was one of the more highly anticipated Federal Reserve decisions of the past few years, the Federal Open Market Committee (FOMC) voted unanimously to raise rates by 0.25% to a target Fed Funds rate of 2.25% to 2.50%. The Fed’s focus was on continued strong US economic data from Main Street, rather than on swooning equity and credit markets on Wall Street. The Fed continued to focus on strong US GDP growth, underpinned by strong employment and inflation near their 2% target, rather than being driven by concerns about near-term weakness in global growth and tightening financial conditions. The market was expecting a dovish hike, but was caught off guard by the tone of the statement and the press conference, which was perceived as not being dovish enough. 

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