As expected, the US Federal Reserve announced a 25 basis point increase in the funds rate target today. Earlier this week, Donald Trump had suggested it was crazy for the Fed even to be thinking about a further rate hike; evidently Trump is starting to worry that the economy is turning sour, taking away one of the key "achievements" he likes to brag about.
It probably wouldn't do any good to point this out to Trump, but let's say it anyway. By calling on the Fed not to hike rates, Trump made it just about impossible for the Fed not to do so. Even if there had been some Fed governors inclined to hold rate stable for now, Trump's intervention effectively ruled that out. The market's reaction if it ever began to suspect that monetary policy was being set from the Oval Office really doesn't bear thinking about.
A lot of market-watchers have been focused less on today's decision, which was basically seen as a done deal, and more on what clues the Fed might offer about its actions in 2019. Not many, it turns out: considering the wild gyrations in the stock market, the collapse of oil prices and the ongoing trade tensions between the US and just about everybody, the statement is remarkably anodyne. Risks to the outlook are generally balanced, so future decisions will be data-dependent. Begging Donald Trump's pardon, there will probably be further tightening in 2019, but the pace is likely to slow down considerably from what we have seen in the last little while.
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