why did the markets (forex and stock mkt) rally after the interest rates were raised today?

Question

isn't the interest rate rise supposed to lead to an appreciation in USD? also, why did the equity market surge?

Answer 1

Many people through that a .5% hike was possible, so .25% was below some expectations and it's all about expections since the .25% was already priced in. Also, the more important bit was the bit about looking at the numbers for future guidance and a possible stop in the future rate hikes. The stock market will generally go up on that kind of talk by the Fed chair.

Answer 2

I believe the stock market rallied, because the The Fed language after they raised rates seemed to indicate that they might be nearing the end of hiking short term rates. An end to the raising interest rates is bullish for the equity markets.
The forex move supports the equity move. The language used by The Fed to alert traders and investors about the need for future interest rate hikes was less hawkish (leaning toward the end of Fed intervention). Forex traders viewed the indications that the Fed may be done as bearish for the dollar and hence the downward move in the dollar.

Answer 3

The rise in rates was expected -- so had no effect at all on the stock market.

What did have an effect is the statement that the Fed made when they announced the rate increase. They said that in the future they would consider both the state of the economy and inflation when deciding where to set rates. They also indicated that their actions are curbing inflation and that the economy is improving.

This was considered good news.

Answer 4

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Answer 5

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