Fed Keeps Rates Unchanged, Investors Bet Rate Cut Coming

Fed Keeps Rates Unchanged, Investors Bet Rate Cut Coming

$DIA, $SPY, $QQQ, $RUTX, $VXX

FLASH: Global equities declined Wednesday, capping a 3-day winning streak after the Fed held rates steady as expected, but comments from Fed Chairman Powell cast doubt on whether the central bank’s next move would be a rate cut, as expected.

The Fed left its Key interest rate unchanged Wednesday and signaled that no rate hikes are likely in coming months amid signs of renewed economic health, but unusually low inflation.

The Fed left its benchmark rate, which influences many consumer and business loans in a range of 2.25% to 2.5%. The central bank’s low-rate policy has helped boost stock prices and supported a steadily growing economy whose outlook has brightened since 26 December 2018.

The Fed made a technical adjustment to reduce the interest it pays banks on reserves as a way to keep its benchmark rate inside its approved range.

The decision Wednesday to make no change in the policy rate policy had been expected despite renewed pressure from President Trump for the Fed to cut rates aggressively to help accelerate economic growth.

statement from the Fed offered a more upbeat view of the economy, saying that “economic activity rose at a solid rate.” In March, the Fed had said it appeared that growth had slowed from the fourth quarter of last year.

The generally brighter view of the economy and the stock market represents a sharp rebound from Q-4 of Y 2018, when concerns about a possible global recession and fear of further Fed rate increases had darkened the economic picture. Thus, pushing stock prices South especially after the Fed in December not only raised rates 4X in Y 2018, but suggested that it was likely to keep tightening credit this year.

In January, the Fed reversed, suggesting that it was finished raising rates for now and might even act this year to support rather than restrain the economy. Its watchword became “patient.”

Investors responded driving a major stock market rally.

The market gains have also been fueled by improved growth prospects in China and some other major economies and by the view that a trade dispute between the world’s 2 biggest economies is nearing a resolution.

Last week, the government reported that the US economy grew at a strong 3.2% annual rate in Q-1. It was the best performance for Q-1 in 4 years, and it far surpassed initial forecasts that annual growth could be as weak as 1% at the start of the year.

According to data tracked by the CME Group, investors foresee Zero probability that the Fed will raise rates anytime this year. And their bets indicate a roughly 64% likelihood that the Fed will cut rates before year’s end.

Wednesday, the major US stock market indexes finished at: DJIA -162.77 at 26430.14, NAS Comp -45.75 at 8049.63, S&P 500 -22.10 at 2923.73

Volume: Trade on the NYSE came in at 867-M/shares exchanged

  • NAS Comp +21.3% YTD
  • Russell 2000 +16.9% YTD
  • S&P 500 +16.6% YTD
  • DJIA +13.3% YTD

HeffX-LTN’s overall technical outlook for the major US stock market indexes if Bullish in here.

Stay tune…

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Paul Ebeling

Paul A. Ebeling, polymath, excels in diverse fields of knowledge. Pattern Recognition Analyst in Equities, Commodities and Foreign Exchange and author of “The Red Roadmaster’s Technical Report” on the US Major Market Indices™, a highly regarded, weekly financial market letter, he is also a philosopher, issuing insights on a wide range of subjects to a following of over 250,000 cohorts. An international audience of opinion makers, business leaders, and global organizations recognizes Ebeling as an expert.

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