The Federal Reserve, to the surprise of virtually no one, voted to keep interest rates unchanged today, with that decision ending the bank's latest two-day FOMC meeting. The tally to keep rates unchanged was unanimous. The next scheduled FOMC meeting is in March. The consensus view is that borrowing costs will go up at that time.
As to the Fed's rationale for holding the line here, the bank said that while it expects inflationary pressures to heat up as the year moves along, there was not yet a major move higher by prices. Heretofore, the Fed had been indicating that it expected inflation to hold below the bank's 2% objective. Now, it sees that level being reached in the current 12 months.
The projected rise in overall inflation this year--and we did see some wage pressures emerge in 2017--could cause the Fed to raise rates as many as four times this year, with an uptick in December providing that fourth increase. As to the reaction to the Fed's statement, the Dow Jones Industrial Average, up by 150 points before the 2:00 statement, pulled back some after the issuance.
All in all, we do not see this meeting as a game changer, but do look for the central bank, soon to be under new stewardship, to take a somewhat more aggressive, or hawkish, monetary stance going forward. How hawkish the Fed becomes, and we are not looking for a see change here, could determine just how strong the stock market remains going forward.