Federal Reserve policy-makers today raised the federal funds rate target by 25 basis points to 5%. "Economic growth has been quite strong so far this year," said a statement by the Federal Open Market Committee, which set the rate. "The committee sees growth as likely to moderate to a more sustainable pace, partly reflecting a gradual cooling of the housing market and the lagged effects of increases in interest rates and energy prices."
"I'm feeling positive on the equity market because the economy is strong and resilient," said Jane L. Caron, chief economic strategist at Dwight Asset Management. "Inflation pressures are picking up, but they haven't picked up so it undercuts the equity market. Our firm continues to be a bit bearish on the fixed-income market and thinks rates could rise." She also thinks the bulk of the Fed tightening is done, but said there may be "one or two more raises" before the Fed pauses.
David A. Hershey, managing director and director-research at Lotsoff Capital Management, said: "The Fed is a little more committed to tightening than the markets thought."
"The economic outlook would determine whether there would be a pause or not" in June, when the Fed committee next meets, Mr. Hershey said.
