Fed Raises Rates But Signals Shift in Outlook

The stock and bond markets interpreted the Fed’s quarter-point increase yesterday to mean that an end is in sight for rate hikes, despite typically ambiguous and open-ended language. Here’s part of what The Times had to say on the subject:

By all accounts, Fed officials are entering a more uncertain new phase, when the need to raise rates even higher is less clear but inflation remains a source of worry. United States economic growth has been surprisingly strong, despite the wallop of Hurricane Katrina and the steep rise in oil and natural gas prices over the last year. But the nation’s blistering housing market, which has been behind much of the recent economic growth, shows signs of finally cooling down. Sales of existing homes have slowed, inventories of houses on the market have grown and builders are bracing for a slower pace of construction next year. The evidence on consumer spending, the other critical force behind recent growth, remains ambiguous.

Fed Raises Rates, Modifies Tone [NY Times]