Fed lift-off: Rate hike welcomed by markets as FOMC gives investors 'best-case scenario'

Investors and analysts seem to have welcomed the US interest rate rise introduced by Federal Reserve chair Janet Yellen. The Federal Open Markets Committee (FOMC) hiked the interest rate for the first time since 2006 on Thursday (16 December).

Asian markets soared, following Wall Street gains, and the FTSE 100 jumped 1.5% in late morning trading. The strong economic situation in the US has fuelled the Fed's decision to increase the central lending rate.

"This rate hike is nothing less than a historic success for Janet Yellen's Fed and its communication strategy," said Ranko Berich, head of market analysis at Monex Europe. "Interest rates have gone up without causing undue volatility and the Fed's strategy for the future is crystal clear. The FOMC has done its job admirably and is now in a strong position to face an uncertain outlook in 2016."

The Fed gave markets a best-case scenario of a "dovish" hike, meaning that the hike was minimal and the interest rate will gradually go up. The FOMC was bullish on the inflation rate as well, the majority expecting CPI above 1% at the end of 2016, which is "indicating a high level of confidence in the economy," according to Berich.

"The decision to raise rates for the first time, following almost a decade of crises and unconventional policy measures, is being welcomed as much for its end to uncertainty as its vote of confidence in US economic recovery," Michael van Dulken, head of research at Accendo Markets said. "Has Yellen fired the starting pistol for a return to conventional policy and a delayed Santa rally?"