Fed Leaves Key Interest Rate Unchanged

Fed Leaves Key Interest Rate Unchanged

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

The Fed held interest rates steady Wednesday at its first policy meeting of the year, the head of the central bank pointed to continued moderate economic growth and a “strong” job market, and giving no sign of any imminent changes in borrowing costs.

We believe the current stance of monetary policy is appropriate to support sustained economic growth, a strong labor market and inflation returning to our symmetric 2% objective,” Fed Chairman Powell said at a news conference following the central bank’s unanimous decision to maintain the Key overnight lending rate in a range of between 1.50% and 1.75%.

He noted signs that global economic growth was stabilizing and diminishing uncertainties around trade policy, concern about both of which were Key factors in the Fed’s decisions to cut rates 3X last year.

But, he added, “uncertainties about the outlook remain, including those posed by the new coronavirus.” The outbreak of the new flu-like virus in China has led to fears of a further slowdown in the world’s 2nd-largest economy.

We are very carefully monitoring the situation,” Mr. Powell said, adding that while the implications of the outbreak for China’s output are clear, it is “too early” to determine its global effect or impact on the US economic outlook.

The Fed’s statement, calling out solid job gains and low unemployment, was little changed from the 1 issued after its December meeting.

The Fed’s going to remain on hold for the foreseeable future, as long as GDP growth and inflation does not move outside of the bands that it is within 2%.

Mr. Powell did not give new guidance about its current practice of buying $60-B monthly of US T-Bills to ensure adequate short-term liquidity in bank funding markets.

That program will remain in place at least into April, while a related offering of repurchase agreements will continue at least through April.

Fed policymakers have been discussing how and when to end the temporary T-Bill purchases, which have been underway since October, and what sort of permanent replacement it could use to ensure the central bank keeps control of the federal funds rate.

Yields on US Treasury securities moved lower as Mr. Powell spoke, while benchmark US stock market indexes gave up most of their gains on the day. USD was flat against a basket of peer currencies.

In a related decision, the Fed raised the interest it pays banks for excess reserves by 5 bpts to 1.60%, a technical adjustment officials say was needed to keep the federal funds rate around the middle of the target range.

Wednesday, the major US stock market indexes finished at: DJIA +11.60 at 28734.36, NASDAQ +5.48 at 9275.18, S&P 500  -2.84 at 3273.40

Trade on the NYSE: 826-m/shares exchanged

  • NAS Comp +3.4% YTD
  • S&P 500 +1.3% YTD
  • DJIA +0.7% YTD
  • Russell 2000 -1.2% YTD

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

Looking ahead, investors will receive the advance estimate for Q-4 GDP and the weekly Initial and Continuing Claims report Thursday.

Stay tuned…

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