The market continued to ride the wave of anticipated tax reform to new highs.

With only five days until its Christmas recess, Congress is racing to pass tax legislation and a budget resolution. The latter is necessary to avoid a partial government shutdown which would take effect on Saturday. Given the time constraints involved, Congress will most likely end up passing a short-term resolution, similar to the one passed earlier this month, and then revisit the topic in the new year.

Having appeared to secure the necessary votes for its proposed tax legislation, Congress is expected to begin voting as early as Tuesday and appears poised to approve the final bill by Wednesday. President Trump is expected to immediately sign it into law.

Largely overlooked was the Fed’s widely anticipated decision to raise the Fed Funds rate by 0.25% bringing it to 1.25-1.50%. Looking forward, the Fed maintained its forecast for an additional three hikes in 2018 and 2019. Additionally, the Fed increased its 2018 GDP projection from 2.1% to 2.5% to reflect the near-term benefits of Congress’ proposed tax reform. However, the Fed left its long-term projection of 1.8% unchanged in anticipation that the tax overhaul will have little impact on longer-term growth.

In Europe, the ECB left both its benchmark interest rate and bond-buying program unchanged while increasing its 2018 economic growth from 1.8% to 2.3%. In China, the PBOC increased its benchmark rate by 0.05%. While relatively small, the increase was the first since March and was viewed by many as a surprise. Looking back, 2017 may well be remembered as the inflection point where major central banks took steps or signaled their intention, to begin normalizing monetary policy.