Treasurys surge after the Fed hikes

“While it is hard to predict the future, it is reasonable that the Fed will continue to increase short term rates throughout 2018, if the economy continues to remain strong and there is an infrastructure plan enacted”, Wasserman said. This year, everyone’s coming around to the Fed’s view.

You’ll recall that vice chair Stanley Fischer talked about four rate increases in 2016, but that was before stocks plunged thanks to global economic weakness and low demand for oil prices. Investors who were once terrified that the Fed might pull back on monetary stimulus now see the rate hikes as signalingconfidence in the economy. “For once, the Fed and the Street seem to be aligned”.

“The tweaks mainly benefit the sellers’ market, which means more sales, more supply and weaker prices. There’s no need to alter market expectations”. Still, economic data will be the biggest factor.

Borrowers with private loans – whether debts that originated with private banks, or federal student loans they refinanced with private lenders – should check to see if they have a variable interest rate and if so, they should expect to see their rates rise in the next one to three months, Kantrowitz said.

“In view of realised and expected labour market conditions and inflation, the committee made a decision to raise the target range for the federal funds rate”, the FOMC said.

For Mr Faust and others, the conversation is now focused on whether the Federal Reserve, when it releases new economic forecasts this week, could even raise its forecast for rate rises also.

The immediate market reaction indicates investors interpreted the statement as more dovish than expected.

According to the policy statement, risks to the outlook remained “roughly balanced”.

According to JPMorgan Chase, emerging market bond and equity funds have attracted inflows of $13.6 billion since the beginning of this year, almost recouping the $13 billion of outflows seen in the seven weeks after the upset victory of Donald Trump in the USA presidential election.

Officials have split over whether to incorporate the potential effect of President Donald Trump’s proposed tax cuts and spending increases into their forecasts. She has also sidestepped questions about how the Fed would respond to expansionary fiscal policy. At the same time, we know that rates will get slashed to zero (and presumably Quantitative Easing ramped up) by our New Keynesian central bankers in response to the next recession.

Kurt Karl, chief economist at Swiss Re Ltd., was similarly divided over the promises and perils under Trump.

But the overall economy is showing many positive signs. “The net positive only holds if we do not end up in a trade war”.

Yellen said she had a brief meeting with Trump, and has met a couple of times with Treasury Secretary Steven Mnuchin. The downside, though, is that if higher interest rates are accompanied by inflation, cash alternatives may not be able to keep pace with rising prices.