- The Fed hiked rates to its new target range by 25 basis points, as expected.
- However, the Fed’s stance on future hikes has moderated amid tighter financial conditions.
- A pause in 2019 now appears more likely.
Business as usual? Not quite
Hike number nine was, at first glance, business as usual for the U.S. Federal Reserve. The target federal funds rate range now stands at 2.25%–2.5%, following the widely expected move to raise rates by a quarter percentage point on December 19.
Yet in terms of what comes next the Fed’s stance has changed. Here’s why: In October and November 2018, a stronger dollar, wider credit spreads and weak equity markets all contributed to tighter financial conditions.
In the wake of this volatility, members of the Fed’s rate-setting committee have struck a more “dovish” tone. Put another way, their appetite for significant further rate hikes seems to be diminishing.