On 16 December, 2015 – The Federal Reserve increased its fed fund interest rate range

US markets responded favorably to the Fed move.
United States
Stocks advanced Wednesday as the Federal Reserve’s decision to raise interest rates was taken as a vote of confidence in the US economy. The Fed’s forecast that future increases will be gradual was seized upon as a promise the FOMC won’t endanger the expansion. The Dow Jones industrials were up 1.3 percent while both the S&P and Nasdaq added 1.5 percent.
The Federal Open Market Committee (FOMC) raised the fed funds rate target range to a range of 0.25 to 0.50 percent from zero to 0.25 percent. It also said that both the pace and magnitude of future rate increases will be data dependent. The FOMC’s projections indicated the median estimate for the end of 2016 was unchanged at 1.375 percent. For 2017, the median estimate of the funds rate came in at 2.375 percent. Finally, the longer-run funds rate is estimated by the FOMC at 3.50 percent. The FOMC again lowered its expectations for inflation in 2016, with core inflation not returning to 2.0 percent until 2018. As the Fed embarks on a new tightening cycle, policy will remain exceptionally accommodative. In addition to the historically slow path of rate increases, the FOMC reaffirmed their policy of reinvesting Treasury and agency holdings until normalization is “well under way.” The decision to increase rates was unanimous.
Shares of utilities — a sector that typically fares well against a backdrop of low interest rates — advanced as did banking shares. Higher rates should allow banks to fatten the margins between what they lend at and what they pay depositors.
These data reflect observations at 4:00 PM US ET. Gold at the afternoon London fixing was up US$13.50 to US$1,075.25. Copper futures were up 0.7 percent to US$2.07. WTI spot crude was down US$1.72 to US$35.64.  Dated Brent spot crude was down US$1.26 to US$37.19. The US dollar was up against the yen, pound and the Canadian dollar. It was virtually unchanged against the euro. However, it declined against the Australian dollar and the Swiss franc. The Dollar Index was up 0.3 percent. The yield on US Treasury 30 year bond was up 2 basis points to 3.01 percent while the yield on the 10 year note was up 4 basis points to 2.30 percent.
Europe
The European markets got off to a shaky start Wednesday but climbed solidly into positive territory around midday. The markets pared their gains going into the close, as early gains in the United States began to erode. Investors were eagerly awaiting today’s announcement from the Federal Reserve which took place after markets here were closed for the day. The FTSE gained 0.7 percent, the SMI was up 0.3 percent and both the CAC and DAX added 0.2 percent.
The Bank of England is closely watching the buy-to-let sector and it stands ready to take action, Governor Mark Carney told Financial Times. Carney said he is concerned about high levels of lending in the buy-to-let segment and fearful of the risk that investors would all seek to sell at the same time if there were a general decline in house prices. Further, he said the turn of the year is no longer the time to consider lifting interest rates. In July, he said the decision on rates would be taken at the turn of the year.
RWE and E.ON advanced. Automakers BMW and Daimler advanced. In Paris, Technip was up after it announced a contract win. Guichard-Perrachon surged after the company said it plans to sell assets to reduce debt. Zodiac Aerospace dropped after the company reported a decline in quarterly sales. In London, Rolls-Royce climbed after announcing a management shake-up. AstraZeneca has entered into a definitive agreement to acquire the core respiratory business of Takeda Pharmaceutical Company for $575 million. Dixons Carphone advanced. The company reported earnings from continuing operations for the first half of the year of £55 million compared to £53 million.
Eurozone consumer prices increased more than estimated in November. The November harmonized index of consumer prices rose to 0.2 percent from 0.1 percent in October. On the year, the HICP was up 0.2 percent. The UK ILO jobless rate was 5.2 percent in the August to October period.
Asia Pacific
Asian stocks joined a global rally Wednesday as the oil selloff paused and investors bet the Federal Reserve would stick to a slow path for rate increases. Markets here were closed prior to the Fed announcement.
The Shanghai Composite was up 0.2 percent with energy stocks gaining ground after China’s top planning body, the National Development and Reform Commission, suspended a retail oil price cut that was scheduled for Wednesday and said it would adjust the current pricing mechanism in a bid to combat air pollution. The Hang Seng jumped 2.0 percent even as Prada shares slumped after the luxury goods company reported a sharp decline in profits.
The Nikkei was up 2.6 percent after plunging 1.7 percent to hit its lowest level since October 22 the day before. Energy explorer Inpex rallied, JX Holdings and Japan Petroleum jumped. Banks Mitsubishi UFJ Financial, Mizuho Financial and Sumitomo Mitsui Financial gained. General Electric Company has agreed to sell its commercial lending and leasing business in Japan to Sumitomo Mitsui Finance and Leasing, a joint venture with Sumitomo for $4.8 billion. Yahoo Japan rose after agreeing to buy travel site Ikyu for ¥100 billion. Asahi Group Holdings advanced on a Bloomberg report that the brewer and investment firm KKR is among the companies considering bids for British brewer SABMiller’s European beer brands. Japan Airlines retreated after suspending flights between Paris and Tokyo’s Narita airport next month.
Australian shares snapped a six-day losing streak as investors awaited the Fed’s interest rate decision later in the global market day. The S&P/ASX was up 2.4 percent while the All Ordinaries added 2.3 percent. Energy stocks Woodside Petroleum, Oil Search and Santos climbed as did BHP Billiton and Rio Tinto. Newcrest and Evolution Mining advanced after gold prices increased for a second day. The big four banks closed higher on the day.
The Kospi added 1.9 percent and the Sensex was 0.7 percent higher.
Global Stock Markets

Please remember, the value of investments and the income from them can do down as well as up. Funds that invest in overseas markets may be subject to currency fluctuations. Investments in small and emerging markets can be more volatile than other overseas markets. Reference in this document to specific securities should not be construed as a recommendation to buy or sell these securities, but is included for the purposes of illustration only.
Looking forward*
Japan reports November merchandise trade balance. Germany’s December Ifo survey will be released along with UK November retail sales and December CBI industrial orders data. In the US, December Philadelphia Fed outlook survey, November leading indicators and third quarter current account will be released along with the weekly jobless claims, money supply and fed balance sheet.
*Note — all releases are listed in local time.