On Wednesday, March 21 the United States Federal Reserve raised the benchmark lending rate by 0.25%, as expected. The Fed also charted out an aggressive course for rate hikes heading into 2019 and 2020. Policy makers are forecasting three more rate hikes in 2018.
The Dow Jones Industrial Average was up triple digits at one point in the day but closed down 44 points as anxiety remains over the prospect of rate tightening. Analysts expect strong U.S. growth to continue in the aftermath of the U.S. Tax Cuts and Jobs Act. Some estimates have projected that tax reform could add $6 trillion to corporate revenues over the next decade.
Goldman Sachs Group Inc. (NYSE:GS) fell 0.51% when trading closed on March 21. JPMorgan Chase & Co. (NYSE:JPM) was up marginally – 0.04% - on the day. Both banks praised the passing of U.S. tax reform as a necessity to power the economy going forward. Goldman Sachs veteran Gary Cohn recently departed the Trump administration due to concerns over trade policy after the implementation of steel and aluminum tariffs.
The Federal Reserve cited trade concerns in the comments made after its rate decision. New Fed chairman Jerome Powell said that new trade policy had become a point of worry for U.S. businesses. The Trump administration also appears poised to slap further tariffs on China, this time over intellectual property rights. This could spark a prolonged trade wars between the two largest economies in the world.
