The Fed did not change rates today, and didn’t change course in terms of their plans for raising rates over the coming quarters and years, at least in terms of the Fed statement released after their meeting today. This outcome, or lack of any change, is a bit of a double-edged sword – since they didn’t raise rates of state directly that they are concerned about financial markets (which we all know they are), we could interpret this to be a positive, meaning that the Fed feels like the economy is solid and therefore inflation is a threat, so they need to continue to raise rates over time. The negative is that rising rates will have a negative impact on the economy and the financial markets (eventually), so that can make today’s Fed decision appear negative for markets. Had they stated the obvious – that the economy is slowing, and further stated that they may need to postpone or terminate their plans to raise rates further, that could have also been seen as a positive or negative, depending on how the average investor wanted to interpret it.
It is clear that the global economy is slowing, including ours here at home, so the Fed will likely need to adjust and adapt to that reality. How they choose to convey that message will certainly have a direct impact on financial markets. A slower ramp in rates will definitely help ease the pain a bit, in terms of the cooling impact rising rates can have on the economy and stock prices, but the slowing economy will certainly negatively impact corporate earnings, and a strengthening dollar, in relation to other currencies, will hurt U.S. exporters. Care must be taken when choosing both the timing of purchases, and the selection of specific companies to invest in.