Wall Street Journal | Federal Reserve Interest-Rate Decision

USA, December 14, 2016 (CNBC): The Fed surprised markets by forecasting three interest rate hikes next year, and that number could increase even more once President-elect Donald Trump takes office.

The Fed Wednesday raised rates for the second time in 10 years, boosting their short-term interest rate target by a quarter point to 0.50 to 0.75 percent.

In forecasts released after its meeting, Fed officials also indicated that they could hike the fed funds target rate three times next year, instead of the two quarter-point increases previously forecast for next year. They also raised the forecast for future years to three hikes in both 2018 and 2019.

Stocks traded sharply lower, while yields snapped higher. The 2-year Treasury yield, the most sensitive to the Fed, shot to a seven-year high of 1.27 percent. The dollar index also spiked, jumping 1.2 percent to 102.24.

“There’s no mention of fiscal stimulus, so today’s rate hike and the expectation for three next year — which is an increase of one hike — all reflects cumulative progress and expected progress against the dual mandate,” said Ward McCarthy, chief financial economist at Jefferies.

Fed Chair Janet Yellen, during her post-meeting press briefing, said that some Fed officials considered the the president-elect’s proposals in their projections. The Fed’s interest rate forecast is presented as a chart, or “dot-plot” reflecting the anonymous views of Fed officials on where interest rates are heading.

Source: CNBC