Fed raises rates for first time in nine years: let the trading begin


Well, they finally did it.

In one of the most anticipated rate changes in recent memory – although the first in an upward direction since 2006 – the US Fed (or more precisely, the FOMC) announced a 25 basis point rate hike in its target funds rate. The Fed’s new target range will go from 0-0.25% to 0.25-0.5%.

What does this mean for currency traders?

In the near term, probably more volatility, as the market digests the move and begins debating when the next rate hike will come.

John Hardy, Head of FX Strategy at Saxo Bank posted the following on TradingFloor.com regarding the Fed’s (not so surprise) move:

The FOMC announced a 25 basis point rate hike to a new range of 0.25-0.50%, effectively ending the era of near-ZIRP and carrying out the first rate hike in over nine years. The FOMC vote was unanimous and the FOMC policy forecasts are unchanged versus Sep estimate (median estimate for 2016 at least), showing expected rate of 1.4% by end 2016 (far higher than market expectations). The initial read is somewhat hawkish on the failure to lower the dot plot more for 2016, even as Fed says pace will be gradual for further hikes. More to follow here with comments attached to this squawk. Stay tuned.

For more detail on the Fed rate hike see CNBC.

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Fed raises rates for first time in nine years: let the trading begin

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