Federal Reserve Chair Jay Powell maintained the Fed’s independence from the White House last night, slamming the vampire stake in another quarter inch.

The Fed funds rate now sits at around 2.25% to 2.5%. The fourth rate hike for 2018.

A hawkish Fed is saying the US economy is strong but headwinds to growth are likely to come from overseas. In response, the new dot plot indicates two further hikes next year.

Over the past few weeks equities markets had factored in a more dovish result and outlook for next year, with many thinking the Fed was ‘done’ hiking rates. Nope.

This all led to the correction in US markets last night.

Interestingly, Trump has refrained from jawboning the massive balance sheet run-off which is stealthily extracting liquidity from the US economy (under the cover of rate hikes).

Perhaps that will be Trump’s western front battle next year - with his trade war continuing in the east.

Mike.

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