Financial Analyst Says Fed Rate Hike Reflects ‘Economic Conditions’

Pedestrians walk past the Federal Reserve Building in Washington April 3, 2012. Investors are awaiting minutes from the U.S. Federal Open Market Committee’s March 13 meeting that may provide clues on any potential quantitative easing. REUTERS/Joshua Roberts (UNITED STATES – Tags: POLITICS BUSINESS) – GM1E8431SN101

Financial markets continued to retreat in the wake of the Federal Reserve’s decision to raise the Fed Funds rate by 0.25 percent, to a range of 2.25 and 2.5 percent.

The move by the Fed was expected. It was the fourth rate hike of 2018 and the ninth since December 2015.

“The Fed has a dual mandate,” said David S. Spika, chief strategic investment officer for GuideStone Financial Resources: “price stability as determined by the Core Consumer Price Index and full employment. In light of this dual mandate, the current economic conditions warranted this rate hike.”

The Fed did signal that it would likely raise rates twice in 2019 — down from earlier forecasts of three times — and the Fed’s post-meeting statement indicated the potential for a slower rate of increases going forward.

Markets did not respond favorably, retreating on both Wednesday and Thursday (Dec. 19-20). Financial markets have largely declined through 2018 in response to slowing global growth and tightening monetary policy as central banks raise rates.

According to figures cited by Deutsche Bank, 90 percent of all asset classes worldwide posted negative year-to-date returns through mid-November compared to only 1 percent of global asset classes posting negative returns in 2017.

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Source: Baptist Press