US Federal Reserve raises rates and trims outlook for 2019 rate increases

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"We're listening to the message of the market".

The S&P 500 index lost 14 points, or 0.6 per cent, to 2,491. The 1,200 points of this decline have occurred since the decision was announced on December 19.

The key point, however, is that stocks must fall a long way before the Fed reacts. A global slowdown is already weighing on growth.

Both oil contracts slid Thursday, reversing strong gains from a day earlier on concerns about growth and USA oversupply, and tracking equity losses.

Metcash rose 1.28 per cent to $2.38 and poultry producer Inghams was up 1.66 per cent to $4.28. United States markets pitched into a sell-off, extending losses that have piled up over the fall.

"The truth is, we've become spoilt over the last nine years by markets that have steadily gone higher without too much of a correction, and the prospect of further tightening of monetary conditions will mean that investors will have to be much more discerning about where they put their money as we head into 2019", he said. For instance, it lowered its estimates of real GDP growth in 2018 and 2019 and modified its policy statement from saying that it expects "further gradual increases in the target range for the federal funds rate" to "some further gradual increases".

As expected, the Dow Jones Industrial Average plunged on the news, paring earlier triple-digit increases.

USA stocks were poised for further losses at the bell, with Dow futures and the broader S&P 500 futures down 0.3 per cent. The dollar stood at ¥112.20, slightly off the seven-week low of ¥112.09 touched just before the Fed.

In local finance news on Thursday, Dulux Group and Incitec Pivot are scheduled to hold their annual general meetings, while November's labour force figures are due from the Australian Bureau of Statistics at 8.30am.

As expected, the Fed raised the federal funds rate - which is what banks charge each other for overnight loans - by a quarter point to a range of 2.25 to 2.5%.

Powell does not appear to take the remarks personally, confirming that the president's tweets will not have a bearing on Fed policy.

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Williams tried to correct the market impression that two interest rate increases are set in stone for next year, highlighting a slight change of language in the policy statement issued Wednesday.

After a sharp early gain today, the S&P 500 index retreated 50.80 points, or 2.1 percent, to 2,416.62.

The dollar initially gained as the Fed was seen as more hawkish but it lost steam against other safe-haven currencies, such as the yen.

Some, including me, expressed concerns about the risks and unintended consequences of central banks continuously "goosing" markets.

Those are more acknowledgments that rates are moving closer to the point where policy makers will at least take a break from the quarterly procession of hikes they pursued throughout 2018. In Powell's case, the challenge has taken the form of a controversial policy decision due to the competing pull of domestic economic conditions and the combination of technical market fragility and a slowing global economy.

"We expect additional rate hikes will invert the three-months to 10-year yield curve, which is a reliable signal for a bear market for stocks and a coming recession for both the USA and the rest of the world", said Jeffrey Kleintop, chief investment strategist at Charles Schwab in Boston.

The president has ramped up pressure on the Fed, calling on the central bank to stop increasing interest rates.

"In our view, these developments have not fundamentally altered the outlook", Powell said at a news conference after the policy-setting Federal Open Market Committee wrapped up a two-day meeting in Washington.

The central bank has raised rates with steady regularity as the USA economy has strengthened. But it also raises the risk that the Fed will jolt the markets by catching them off guard.

There are worries, however, that the economy could enter choppy waters next year as the fiscal boost from the Trump administration " s spending and $1.5 trillion tax cut package fades and the global economy slows.

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