End-of-Day, Wednesday, December 13, 2017

As expected, the Fed pushed the target federal funds rate range up +0.25% to 1.25% to 1.50%. More importantly in some respects, the 2018 GDP growth forecast increased and the expectation for unemployment decreased. The median path of forecasts still looks like three rate hikes in 2018.

So with all of that, equities and bonds both rallied big after the announcement. The 10-year fell to 2.34%. Mortgages rallied +31 bps from this morning's levels. Equity investors saw the improved GDP and unemployment forecasts as signals that strong economic is still in the cards. Bond investors saw the committee sticking with three rate hikes next year as a signal that while economic growth is strong, it's still not enough for the FOMC to get too aggressive with the rate path just yet.

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