Last night the US Fed raised its rate by 50 bp and announced the looming start of asset sales from its balance sheet.

The market expected these things, but the details and forecasts were a little less hawkish, which played against the dollar and favoured the equity market. We should expect that the markets adjustment to the Feds comments could stretch over several days or even begin a longer trend of market recovery.

The main points we saw

A later start. The Fed will start selling in June, whereas markets were expecting this move as early as May.
A more cautious beginning. 47.5bn worth of paper will be sold in the first three months, while minutes from the previous meeting indicated that the FOMC discussed 95bn in sales per month. The Fed will not release the latest figure until three months later.
A cap on rate hike step. Powell has rejected the idea of a 75point rate hike at the next meeting.

Although the states last saw a rate hike of 50 points 22 years ago, the current moves should be perceived as softer than many observers estimate. From this point of view, the Fed maintains some continuity with the previous course and takes the first step more diminutive than the markets expect.

It may well be that an unexpected decline in GDP for the first quarter, according to a preliminary estimate, worked on the Feds easing rhetoric. It is also possible that the FOMC is looking with apprehension at the ballooning foreign trade deficit as evidence of a decline in the…