"Steady as she goes" was the rule today as the Federal Reserve stuck to its strategy of gradually raising interest rates and Wall Street repeated its pattern of pushing up stock prices every time the Fed hikes rates.
Delivering the increase that everyone knew was coming, Fed policy makers raised rates for the third meeting in a row, boosting their benchmark rate by a quarter of a percentage point, from 1.5 percent to 1.75 percent.
That rate applies only to overnight loans, but it sets the pattern for many other interest rates -- among them the prime rate charged by banks, which immediately jumped from 4.5 percent to 4.75 percent.
Historically, when the Fed hikes rates stock prices often fall, but today all the major stock indexes rose in response to the Federal Reserve's announcement. That's also what happened when the Fed boosted rates by a quarter of a point in June and August.
Today the Dow Jones industrial average, which was ahead by only about a dozen points before the Fed acted, closed the session up 40 at 10244.93. The Nasdaq Stock Market composite index climbed 13 to 1921.17. The Standard & Poors 500 stock index gained seven points to 1,129.30.
The stock market response indicates Wall Street and the Fed are on the same page: Both believe the economy is regaining momentum and no longer needs the extra push of the lowest interest rates in more than 40 years.
Even after three hikes in four months, interest rates are low by historical standards, and some rates have barely budged at all. Mortgage rates, for example have come down since the Fed started raising rates and now are the lowest they've been in four months
Low mortgage rates have kept the housing market hot, the Commerce Department reported today. Homebuilding picked up in August, the agency said, rising to a pace of 2 million homes -- the strongest in five months.
In the statement issued along with their decision, Federal Reserve officials said the economy has "regained some traction" and the job market has "improved modestly" in the last few weeks.
Fed officials have blamed the economy's weakness on energy prices -- which, until recently, have been coming down.
But in the last few days the crude oil market has turned around and prices are moving back up rapidly. Today on the New York Mercantile Exchange, crude oil for delivery next month jumped another 75 cents to $47.10 a barrel.