WASHINGTON - The Federal Reserve is raising its benchmark interest rate for the third time in six months, providing its latest vote of confidence in a slow-growing but durable economy. So far, Trump has sent conflicting signals about whether he plans to nominate her for a second term. However, the 2-year Treasury yield, which has also moved higher prior to the last three rate hikes, has stalled. In 3.15pm trading, the Standard & Poor's 500 Index fell 0.4 percent. It was down a point to 2,439.
At 10:54am ET (1454 GMT), the Dow Jones Industrial Average was down 1.54 points, or 0.01%, at 21,326.93.
In addition, they did change their forecast for interest rates: one more is expected for 2017 - no change in the dot plot.
"The risk is that the Fed is too complacent on inflation and more than just transitory factors are keeping it from rising, and that the Fed is too confident about labor market improvement transitioning to wages and inflation", said Michael Gapen, chief USA economist at Barclays Plc in NY. It is a perennial struggle - between the so-called "hawks" at the Fed, who push for higher rates to combat inflation, and the "doves", who argue for lower rates to keep the economy juiced in the hopes of keeping unemployment low. Facebook rose 1.5 percent to $150.68 while Microsoft gained 1.2 percent to $70.65.
The Fed kept forecast for economic growth this year of 2.2 percent, up slightly from its March forecast, with growth of 2.1 percent in 2018 and 1.9 percent in 2019. When global investors grow nervous, they often pour money into Treasurys because they're seen as ultra-safe.
Still, even with another rate hike, the impact on consumers and businesses is likely to remain mild, as rates remain very low, relative to years ago, Amis noted. "I don't see any reason why the Fed won't go and maintain the status quo of one more hike before the end of the year", he added.
People walk past an electronic stock board showing Japan's Nikkei 225 index at a securities firm in Tokyo, Wednesday, June 14, 2017.
In determining the timing and size of future adjustments to the target range for the federal funds rate, the Committee will assess realized and expected economic conditions relative to its objectives of maximum employment and 2 percent inflation.
The US central bank's decision to revise a long-standing "policy normalisation" plan came as somewhat of a surprise given a series of weak inflation readings risked delaying its march toward tighter policy. "We expect economy to expand in the next few years", she said in a press conference after the Fed's rate hike.
The Fed also announced it will sell off some of the bonds and other securities it's holding. This may be the market's way of warning the Fed that with inflation expectations broadly contained, being too aggressive in the near term may harm growth moving forward. However, the actual path of the federal funds rate will depend on the economic outlook as informed by incoming data.
The Fed's key interest rate will now hover in a range between 1% and 1.25%. This would be the fourth increase since December 2015.
By using a gradual pace for reducing its bond holdings, the Fed hopes to avoid upsetting financial markets. The hike will push interest rates above 1 percent for the first time since the immediate aftermath of the collapse of Lehman Brothers in 2008.
KEEPING SCORE: In Europe, France's CAC-40 was up 0.7 percent at 5,297 while Germany's DAX advanced 1.1 percent at 12,908. In Asia, Japan's Nikkei 225 ended the day marginally lower.
The dollar index was last down 0.6 percent at 96.437, after earlier touching its lowest since November 9 at 96.323.
The dollar fell to its lowest since the day after the U.S. election against a basket of major currencies following the release of weaker-than-expected U.S. CPI and retail sales data on Wednesday.