Fed Hikes Rates Without Disrupting The Market: 'Classic Yellen'

Considering a strengthening labor market, solid job gains, rising household spending and expansion of business fixed investments, the Federal Open Market Committee of the Federal Reserve raised the target interest rate to between 1 and 1.25 percent Wednesday.

Additionally, it announced an impending "balance sheet normalization program," which would decrease the Reserve’s securities holdings by reducing reinvestment of principal payments.

“The Committee continues to expect that, with gradual adjustments in the stance of monetary policy, economic activity will expand at a moderate pace, and labor market conditions will strengthen somewhat further,” the Committee report read.

The market was initially unmoved by the announcements, with SPDR S&P 500 ETF Trust SPY seeing a minimal spike and iShares Barclays 20+ Yr Treas.Bond (ETF) TLT and SPDR Gold Trust (ETF) GLD trading down less than 0.5 percent each.

See Also: Why Raising The Federal Funds Rate Today Is A Bad Idea

Joe Brusuelas, chief economist at RSM US, called the lack of market disturbance "quite the accomplishment," although not unexpected.

"If one looks at the summary of economic projections, it is classic Janet Yellen: the forecast implies a tighter labor market and inflation below the Fed’s target, which puts in doubt the forward-looking rate forecast for one additional rate hike this year and three rate hikes in 2018 and 2019," Brusuelas said. "We are absolutely not surprised by the non-reaction across asset markets today on the back of a FOMC policy communique that reads dovish."

However, not all charts were unmoved, as Direxion Shares Exchange Traded Fund Trust JNUG fell more than 9.2 percent and Direxion Shares Exchange Traded Fund Trust NUGT 5.3 percent on the report. Direxion Shares Exchange Traded Fund Trust DUSTwas up more than 5.5 percent.

The committee expects 12-month inflation to remain below 2 percent in the immediate term before stabilizing near the committee’s 2-percent goal. It also intends to effect gradual rate hikes as the economy warrants.