News of the widely-anticipated rate hike hammered government bond yields lower while major equity indices rallied higher. What came as a relief to investors was assurances from Federal Reserve Chair Janet Yellen that any further rate hikes this year will be gradual. She further noted that the US economy was heading strongly toward the Central Bank’s employment and price stability goals, giving her confidence that if economic activity evolved as is currently anticipated, the Fed would gradually raise the federal funds rate.
Most market participants had feared that Wednesday’s official FOMC Statement and economic projections would point to a faster pace of rate increases throughout this year. Dow futures are surging in Thursday trade, with the benchmark nearing the psychologically important 21000-mark after extending gains from Wednesday’s session.