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Disheartened investors bid stocks lower yesterday (Jan. 31) after the Federal Reserve, raising interest rates for the 14th time in nearly two years, failed to give Wall Street a clear signal on when those rate hikes would end.
According to the Associated Press, the Fed, in its statement accompanying its quarter-point increase in rates, said “some further policy firming may be needed” to keep inflation under control – leaving the door open for another hike at the next meeting in March and beyond.
The Fed increased short-term rates to a five-year high of 4.5% while the benchmark prime interest rate, which impacts consumers and retailers in the recreational vehicle industry, moved to 7.5%.
The major indexes were already down ahead of the Fed’s decision – the last one under outgoing Chairman Alan Greenspan – and the hint of at least one more rate hike left investors uncertain, although most analysts felt the program of continued, measured rate hikes was at an end.
“The knee-jerk reaction was things aren’t as sure as everybody thought, but when I look at this, this is right in the middle of what my expectations were,” said Chris Johnson, manager of quantitative analysis at Schaeffer’s Investment Research in Cincinnati. “They left a rate hike in the deck here in case they need it, but that doesn’t mean more of the same.”