FOMC Holds Interest Rates Steady as Expected

FOMC Holds Interest Rates Steady as Expected

FOMC Holds Interest Rates Steady as Expected

$DIA, $SPY, $QQQ, $VXX

The FOMC kept interest rates unchanged Wednesday and downplayed weak Q-1 economic growth while emphasizing the strength of the labor market, signalling it is on track for 2 more rate hikes this year.

In a statement following the end of a 2-day policy meeting, the Fed also said consumer spending continued to be solid, business investment had firmed and inflation has been “running close” to its target.

“The committee views the slowing in growth during the first quarter as likely to be transitory,” the Fed said in a unanimous statement.
The labor market continued to strengthen even as growth in economic activity slowed and “the fundamentals underpinning the continued growth of consumption remained solid,” policymakers added.

The Fed raised its benchmark rate by a quarter percentage point at its last meeting in March to a target range of 0.75 to 1%.

Wednesday’s affirmation from the Fed that it was optimistic on economic growth and that its rate rise plans remained intact bolstered USD against the EUR and JPY and drove Treasury yields a bit higher.

Policymakers have been buoyed by recent economic data that showed a surge in business investment and the fastest wage growth in a decade. The unemployment rate also fell in March to almost a 10-yr low.

Some officials had also said they wanted more data in hand before taking additional steps to normalize rates. GDP grew at a sluggish 0.7% annual pace in Q-1 as consumer spending almost stalled. Job growth also slowed sharply in March.

Policymakers are awaiting clarity on the size and scope of the tax cuts, infrastructure spending and regulatory changes that The Trump Administration will be able to push through Congress. A stimulus package could speed up the pace of rate hikes.

Inflation had been edging higher, but the so-called core PCE price index increased 1.6% in the 12 months through March, the smallest gain since last July. Core PCE is the Fed’s preferred inflation measure and is below its target.

The Fed in its statement showed little concern about a softening in inflation, characterizing it as “running close to the committee’s 2 percent longer-run objective.”

The FOMC is also gearing up to announce sometime this year when and how the central bank will begin shrinking its $4.5-T balance sheet. Wednesday’s statement offered no details.

The FOMC officials will hold their next policy meeting on  13-14 June.

Wednesday, the US major stock market indexes finished at: DJIA +8.01 at 20957.90, NAS Comp -22.82 at 6072.53, S&P 500 -3.04 at 2388.13

Volume: Trade was heavy as 1.06-B/shares exchanged hands on the NYSE

  • NAS Comp +12.8% YTD
  • S&P 500 +6.7% YTD
  • DJIA +6.1% YTD
  • Russell 2000 +2.5% YTD
HeffX-LTN Analysis for DIA: Overall Short Intermediate Long
Neutral (0.24) Bullish (0.29) Bullish (0.25) Neutral (0.18)
HeffX-LTN Analysis for SPY: Overall Short Intermediate Long
Bullish (0.31) Bullish (0.38) Bullish (0.31) Bullish (0.25)
HeffX-LTN Analysis for QQQ: Overall Short Intermediate Long
Bullish (0.29) Neutral (0.21) Bullish (0.42) Bullish (0.25)
HeffX-LTN Analysis for VXX: Overall Short Intermediate Long
Bearish (-0.31) Neutral (-0.23) Bearish (-0.35) Bearish (-0.33)

 

Stay tuned…

The following two tabs change content below.

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.

Latest posts by Paul Ebeling (see all)

You must be logged in to post comments :  
CONNECT WITH