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JOLTS and claims — What you need to know in markets on Thursday

Myles Udland
Markets Reporter

As expected, the Federal Reserve raised rates on Wednesday.

And now, markets can move on.

On Thursday, the economic data flow will be reasonable, with the weekly report on initial jobless claims set for release in the morning as it is most every Thursday.

Elsewhere in data we’ll get the latest reading on housing starts and building permits, as well as the Philly Fed’s latest manufacturing survey and the January report on job openings and labor turnover — also known as the JOLTS report — which is one of Fed Chair Janet Yellen’s favorite economic indicators.

Fed raises rates

On Wednesday, the Fed raised interest rates for the third time since the financial crisis, taking its benchmark Fed Funds rate to a target range of 0.75%-1% from 0.50%-0.75%.

Along with this announcement, the Fed said it expects there will be two more rate hikes this year and updated some language around its 2% inflation target, which has made clear is symmetric.

Following the news, bonds and stocks both rallied with the Dow gaining 112 points and the 10-year yield falling to 2.5% after having hit 2.6% earlier this week.

“The FOMC hiked the target fed funds rate to a range of 75 to 100bp, as largely expected,” write economists at Bank of America Merrill Lynch.

“However, there was little change to the projections for the future fed funds rate and the economy. Moreover, there were only small changes to the statement — mostly a mark-to-market — and Minneapolis Fed President Kashkari dissented in favor of keeping rates on hold. In the press conference, Chair Yellen gave balanced comments and reiterated that the FOMC has not significantly changed its assessment of the economy or the path of the hiking cycle since the last meeting.”

Rick Rieder, the chief investment officer of global fixed income at BlackRock, was more forceful in his commentary following the hike, saying that, “We applaud the Fed for its courage in continuing to move rates forward, despite what has been divided opinion among the Fed participants, and for the courage to describe a policy that would suggest at least three rate moves this year on the road to policy normalization, which will continue into next year.”

Rieder added that, “moving from negative real rates to modestly positive rates is not only still extremely accommodative and economy/market supportive, but it brings the financial system closer to an equilibrium.

“Such a move is in fact healthy for financial transmission mechanisms that have been impaired by artificially distorted rate levels.”

And while an interest rate hike from the Federal Reserve tends to be the kind of news event that a lot of readers and consumers feel doesn’t pertain to them, higher interest rates can have impacts across the household sector.

Higher interest rates can push up mortgage rates, rates on car loans, and credit card rates. For savers hoping higher nominal interest rates from the Fed will push up interest on savings accounts, that impact is likely to be slower to make its way through the financial system.

But when asked about what consumers can take away from the Fed’s announcement on Wednesday, Chair Yellen was fairly direct, saying that, “The simple message is: the economy’s doing well.”

Myles Udland is a writer at Yahoo Finance. Follow him on Twitter @MylesUdland

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