Fed action: This time could really be different

THE US Federal Reserve’s decision to raise rates by the widely-expected 50 basis points last week sparked a large and immediate “relief rally’’ in US stocks and a new mantra making the rounds on Wall Street that “50 is the new 25’’.

Perhaps more of a relief was that “75 will not be the new 50’’, given the Federal Open Markets Committee (FOMC)'s forward guidance that it is “not actively’’ considering raising rates by 75 basis points, at least not yet.

That the rally proved shortlived however, should come as no surprise. Fed meetings have typically acted as de-risking events, especially in a market that had already fallen sharply ahead of the FOMC. Once the initial bounce was completed, markets quickly turned to the overriding concern – the likelihood of an impending US recession and the very real fear that this time could be different.