The Federal Reserve today raised the federal funds rate target by 25 basis points to 5.25%.
"Recent indicators suggest that economic growth is moderating from its quite strong pace earlier this year, partly reflecting a gradual cooling of the housing market and the lagged effects of increases in interest rates and energy prices," according to a statement by the Federal Open Market Committee, which set the federal funds rate target. "However, the high levels of resource utilization and of the prices of energy and other commodities have the potential to sustain inflation pressures," the FOMC statement continued. "Although the moderation in the growth of aggregate demand should help to limit inflation pressures over time, the committee judges that some inflation risks remain."
Stocks soared in afternoon trading immediately after today's Fed announcement. The Dow Jones industrial average closed up 216.12, or 1.97%, at 11,189.68; the S&P 500 rose 26.62, or 2.14%, to end at 1,272.62; and the Nasdaq composite finished today's session up 60.82 or 2.88%, at 2172.66. All numbers are preliminary.
"The FOMC is going as slowly as the committee can to keep inflation expectations in check while waiting for the impact of cumulative rate hikes to slow the economy and soften inflation," said Dan Dektar, executive vice president and CIO of Smith Breeden Associates.