The Federal Reserve’s Federal Open Market Committee (FOMC) kept the United States’ benchmark interest rate unchanged in the range between 5.25% and 5.50% this Wednesday, in line with market consensus.
Today’s FOMC decision was “unanimous.”
In the statement released with the decision, the FOMC reported that recent indicators suggest that American activity has been expanding at a strong pace in the third quarter, while wage gains remain firm, with a low unemployment rate. Inflation, however, remains high.
The FOMC noted in the statement that, when determining the extent of any additional increase in interest rates so that American inflation returns to the target of 2.0% per year, it will take into account the accumulated effect of monetary policy, in addition to expectations and market conditions. job market, inflationary pressures.
It was the second consecutive time that the Fed kept interest rates unchanged and the third since the beginning of this monetary tightening cycle, in March 2022. It is also the longest interest rate hike cycle since 1980, when the Fed manufactured a recession to control inflation in the USA. The interest rate is at its highest level since 2001.
Fed’s Powell says issue of rate cuts not on radar right now
Federal Reserve Chairman Jerome Powell said Wednesday that the U.S. central bank is not considering cutting rates at this time.
“The issue of rate cuts simply does not arise” at this time, Powell said at his press conference following the latest Federal Open Market Committee meeting.
He added: “It’s fair to say the question we’re asking is whether we should raise it further” as authorities consider how they can guide inflation back to the 2% target.
MARKET REACTION
Global stock indexes and the U.S. dollar index mostly held on to gains, while benchmark Treasury yields fell to two-week lows on Wednesday after the Federal Reserve held interest rates steady but left the door open for a further increase in interest rates. borrowing costs.
The statement acknowledged the surprising strength of the U.S. economy, but also nodded to the tighter financial conditions facing businesses and households.
U.S. short-term interest rate traders increased bets on Wednesday that the Fed has no longer raised its policy rates and will begin cutting them in June.
“It’s hard to say whether we’re at the end of the hikes. The Fed very much wants to keep the door open for additional hikes in December or next year,” said Ellen Hazen, chief market strategist at FL Putnam Investment Management in Wellesley, Massachusetts.
Michael Brown, market analyst at Trader X in London, said “the ‘bigger for longer’ policy stance remains in place.”
The Dow Jones Industrial Average rose 105.05 points, or 0.32%, to 33,157.92; the S&P 500 gained 21.24 points, or 0.51%, to 4,215.04; and the Nasdaq Composite added 95.61 points, or 0.74%, to 12,946.84.
The pan-European STOXX 600 index rose 0.67% and the MSCI gauge of stocks around the world gained 0.57%. Benchmark 10-year note yields stood at 4.801%, after falling as low as 4.778%, the lowest since October 17.
Previously, Treasury yields fell due to the Treasury Department’s plans to “gradually” increase the size of its debt auctions to meet funding needs.
The Treasury Department said the size of most auctions from November to January 2024 will increase and that an additional quarter of increases will be needed to meet its funding plans.
The dollar index rose 0.2% to 106.90. Against the yen, the dollar fell 0.5% to 151.06 yen.
The Japanese yen fell sharply on Tuesday as the Bank of Japan adjusted its bond yield control policy, loosening its grip on long-term rates and pushing the currency to a one-year low against the dollar.
That was followed by a new, harsher warning from Japan’s top currency diplomat Masato Kanda on Wednesday that authorities were ready to respond to recent “unilateral and sharp” moves in the currency.
Oil prices fell for the last time following the Fed’s decision. Investors were also keeping an eye on the latest developments in the Israel-Hamas conflict.
US crude recently fell 0.51% to $80.61 per barrel, and Brent was priced at $84.79, down 0.27% on the day.