At the end of the day, financing costs for residential investor properties held steady, with the benchmark FNMA 3.50 coupon ending the trading day down -1/32 to 102.28. As most expected the Fed did raise the Fed Funds rate for the first time in years by 0.25%, right in line with industry expectations. The Dow as well as the S&P 500 took the news well as the Dow closed up more than 200 points to finish at 17749.09 and the S&P at 2073.07, causing the S&P 500 to go positive for the year. In comments after the Fed announcement, Fed Chair Janet Yellen also helped calm markets stating the FOMC would accommodate the markets and adjust as needed with no indication of any rate hike frenzy coming anytime soon.

Yellen also indicated it’s possible that at current pace we could see four more such 0.25% moves in 2016 which would raise the Fed Funds rate by 1.25% through 2016 compared to yesterday’s number. Banks also immediately jumped to raise their Prime Rate with Wells Fargo leading the way bumping its Prime to 3.50%. Forecasters are beginning to coalesce around the next expected rate hike date at the April 2016 meetings.

The announcement was right where markets wanted it to be. While a rate hike was expected, there are always some jitters regarding the announcement. Anything less than 0.25% would indicate the Fed was still wary about the recovery and anything greater than 0.25% could show the Fed feels it’s behind the ball and wants to get ahead of any inflation, although inflation both on the retail as well as wholesale front show both indexes are still below the Fed’s target rate of 2.00% for the year. That said, more emphasis could be placed on the CPI and PPI numbers in the coming months for any signs of higher prices that could cause the Fed to raise the Fed Funds rate prior to its April 2016 round of meetings.