Tech Industry

Fed hikes interest rates by half point

As expected, the Federal Open Market Committee raises interest rates by 0.5 percent--a greater-than-usual increase, but one generally seen as necessary.

As expected, the Federal Open Market Committee raised interest rates today by 0.5 percent--a greater-than-usual increase, but one generally seen as a necessary step to combating signs of increasing inflation.

"Clearly we're not through the woods after this meeting," said Bryan Piskorowski, a market strategist at Prudential. "It's a wait-and-see kind of situation."

The hike marks the sixth increase during the past 12 months. The Fed made a series of preemptive rate hikes of 25 basis points to cool the economy, which had been on a historical growing spurt, though there were no signs of inflation in any economic data.

Yet some recent reports indicate that the economy may be overheating, which many believe prompted the Fed's increase.

Investors did not cringe from the Fed's imminent move, sending the Dow Jones industrial average up more than 500 points since May 10 and the Nasdaq composite index up 300 points. This sharply contrasts with the mood in April, which sent both indexes into dives.

The Dow and Nasdaq were up sharply in early trading today, but gave back some of the gains after the Fed's announcement.

The Fed's main objective is to control inflation, an increasingly difficult mandate considering that some recent economic data shows signs of inflation while other data shows a stable outlook.

Regardless, some traders believe that the Fed must make its position on future rate hikes clear so markets can trade with no surprises in store.

"The only kind of closure (the markets) are going to get is when we see a light at the end of the tunnel with respect to the Fed," said Piskorowski.