After a very slow start to its monetary policy normalisation process, with only one rate hike in both 2015 and 2016, the US Federal Reserve (the Fed) today entered a new, more active phase for monetary policy.

Through the combination of good economic data and Fed rhetoric, the market gave the Fed an irresistible opportunity to lift interest rates again today, raising the Fed Fund target rate by a further 25bp to a new 0.75%-1.0% range.

In detailing the policy decision, however, the Fed statement was little changed from recent months, with no change to the Fed’s own expectations for the future path of monetary policy, ie. the ‘dots’ for 2017 remained at three rate hikes in total – two more to come this year.

The market has taken the statement and the unchanged 2017 ‘dots’ to be a little more dovish than expected.

Important Information
References to “we” or “us” are references to Colonial First State Global Asset Management (CFSGAM) a member of MUFG, a global financial group. CFSGAM includes a number of entities in different jurisdictions, operating in Australia as CFSGAM and as First State Investments (FSI) elsewhere. Past performance is not a reliable indicator of future performance. Reference to specific securities (if any) is included for the purpose of illustration only and should not be construed as a recommendation to buy or sell. Reference to such securities or the names of any company are merely to explain the investment strategy and should not be construed as investment advice or a recommendation to invest in any of those companies. Neither MUFG nor any of its subsidiaries are responsible for any statement or information contained in this document. Neither the MUFG Group nor any of its subsidiaries guarantee the performance of any securities or companies mentioned herein or the repayment of capital in relation to such securities or companies. Investments in such securities are not deposits or other liabilities of the MUFG Group or its subsidiaries, and such investments are subject to investment risk, including loss of income and capital invested.