The big news of the day came from the Federal Reserve and Chairman Yellen raising the Fed Funds Rate for the first time since 2006. This is long overdue, and I expect (as they did today) the markets to increase in volatility over the short-term.

Of equal note, but little talked about, the Fed will also raise interest on reserves from 0.25% to 0.50%. This is the amount of interest the Fed pays banks to keep their money stashed at the Fed. This move disincentives lending on the part of the banks.

It is unclear to me right now what the effect of the Fed’s actions will be regarding the spread between short and long-term rates. It has long been my belief that a steeper yield curve would incentivize lending, increase money supply, be an overall positive for the economy, and therefore be good for capital markets too.

In the short-term it seems clear that the Fed is going to move very slowly. This is somewhat like maintaining the status quo, and markets like the status quo. Therefore with regard to the Fed news today, I am bullish.

The markets and the economy have become accustomed with the Fed and the government’s continuous tinkering and manipulation of the economy. Over the long-term it would be great for the world economy if politicians everywhere would move away from Keynesian theory, which has been so destructive.

That is wishful thinking. As investors we play the cards we are dealt. That means right now we must consider how the Fed/government will manipulate and influence economy and therefore affect markets. I see the relative inaction as being bullish for the markets over the short-term.