- The Fed lifted the federal funds target range to 3.75%-4% with a 25-basis-point hike on Sept. 16, its first increase in three years and the formal start of a tightening cycle.
- Chair Kevin Warsh said the hike was necessary because recent inflation data does not show significant improvement, with the statement citing elevated inflation and the goal of a quicker return to the 2% target.
- The Fed's own expectation is for one more hike this year and no rate changes after that, making this a slow-paced cycle so far.
- History shows the S&P 500 is typically weak in the first few months after a tightening cycle begins but higher by an average of about 6.7% at the 12-month mark, with slow-paced cycles averaging a 10.5% gain.
Quotes
“recent inflation data doesn't show significant improvement, so action was necessary”
“In slow-paced rate hike cycles, the S&P 500 averaged a gain of 10.5% over the next 12 months”