I wonder what effect this will have on the economy? This is very curious timing with Donald Trump becoming President in a little over a month.
This is the timing that had been planned long before. The economy is growing - so, rates have to go up. They are not even beginning to react to the election. They would have done exactly the same thing irrespective of what happened politically.
Of course, once Trump is president and starts doing whatever he wants to do, they will start reacting. If inflation starts taking of, they will do something to dampen it. Given that US is pretty much at full employment right now, if the administration insists on expansionary fiscal policy, they will do something with monetary policy. But they need to know what the administration is going to do.
And, of course, if Mr. Trump feels they are doing anything wrong, he can easily not renominate Mme. Yellen for the next term - she only has a year left, I believe. I wonder, what will the markets think
Does the man even understand what the Federal Reserv-well. He probably does. Probably doesn't care. He's pledged to nominate a Republican to head the Federal Reserve, whatever that means For the record, the Yellen Federal Reserve has been fairly restrained and decent at gauging markets. We've had a good streak under Obama/Yellen.
This rate hike was telegraphed in 2015, when the Federal Reserve told the world they expected to raise interest rates in 2016. They're now telegraphing a series of rate hikes in 2017.
(Do I necessarily think this is a good idea, not necessarily. But that's a different subject).