The US central bank increased rates for the third time this year and removed the reference to its “accommodative” stance from its statement — acknowledging that rates are moving closer to a “neutral” level.
However, at a press conference following the decision, Federal Reserve chair Jerome Powell said the change to the statement did not indicate a change to the likely path of monetary policy.
While Mr Powell said interest rates would increase “across a broad range of consumer borrowing”, he pointed out that rates remained “quite low by historical levels.”
The Fed also raised its growth forecasts and now expects the US economy to grow by 3.1 per cent over 2018.
“The FOMC presented a very positive outlook for US economic activity over coming years,” said ANZ economists.
“Growth is obviously supported by fiscal stimulus, whilst higher oil prices may be supporting investment in that sector.”
The Fed foresees another rate hike in December, three more next year, and one increase in 2020.
ANZ economists are predicting a more gradual path for rate rises.
“We are forecasting one more hike this year and one more next,” they wrote in a note.
“The reality is that guidance remains highly data-dependent and the strength of the business cycle expansion versus expectations will be instrumental in guidance going forward.”
Bank stocks weigh on Wall Street, in focus for local investors
Wall Street initially made gains but a late sell-off saw the Dow Jones fall more than 200 points from its peak of the session.
Bank stocks fell, weighing on the broader S&P 500 index, which closed lower.
In company news, Rupert Murdoch’s 21st Century Fox agreed to sell its 39 per cent stake in British broadcaster Sky to US telco Comcast for $US15 billion, meaning Comcast is set to own all of Sky.
Shares in Disney, which is in the process of taking over 21st Century Fox, rose on the news.
Locally, the Australian share market looks set to open lower.
Bank stocks will be closely watched, following the falls in the US and as investors await the release of the banking royal commission’s interim report.