2019 may see a gummy bear but a grizzly is unlikely

THREE years after it first started raising interest rates in this cycle the Fed has increased rates for the ninth time, raising the Fed funds rate another 0.25 per cent to a target range of 2.25-2.5 per cent. While this was largely anticipated by markets, the Fed was less dovish than expected and so shares sold off in response. It does appear that the Fed has got to a point where it can now pause or at least raise rates more slowly.

Fed hikes and market turmoil

After some initial ructions after the first Fed hike in December 2015 into early 2016, markets generally were not too fussed about Fed hikes in 2016 and 2017 as tightening was "gradual" and we were only going from very easy monetary policy to less easy. However, this year markets have become fearful that the Fed will go too far and push the US into recession. In fact, fears about the Fed were the main initial trigger for falls in shares back in February and more recently since October.