{"id":7476,"date":"2024-03-20T19:43:59","date_gmt":"2024-03-20T19:43:59","guid":{"rendered":"https:\/\/economicherald.net\/?p=7476"},"modified":"2024-03-20T19:43:59","modified_gmt":"2024-03-20T19:43:59","slug":"us-fed-holds-wall-street-explodes","status":"publish","type":"post","link":"https:\/\/economicherald.net\/?p=7476","title":{"rendered":"US Fed holds, Wall Street explodes"},"content":{"rendered":"

US Stock markets surged for the final few hours of Wednesday trade in New York after the US central bank delivered a crowd pleasing call on interest rates, holding the cost of borrowing (federal funds rate) steady.<\/p>\n

Here\u2019s the tl\/dr version if reading\u2019s too hard:<\/p>\n\n

For the rest of you, at 6am in Sydney, the SPI Futures index is pointing to a gain on Thursday of 0.7%.<\/p>\n

Forlorn hopes of an escalating rate cut timetable as well as any stubborn vestiges of a hawkish bias were extinguished by the highly-anticipated, yet widely-expected decision, made at 2pm in New York.<\/p>\n

Within 90 minutes of the announcement, the dithering three major US indices renewed their bullying of record high levels.<\/p>\n

Federal Reserve held rates at a 23-year high and maintained expectations for three cuts before the end of 2024.<\/p>\n

In the full Federal Open Market Committee Meeting (FOMC) statement <\/a>released at 5am on Thursday, (AEST),<\/a> US traders likely noted that Federal Reserve chairman Jerome Powell\u2019s team stuck to their guns by maintaining previous expectations of three cuts to the FFR before the end of 2024.<\/p>\n

Current US rates \u2013 at between 5.25% and 5.5% \u2013 are cresting a 23-year high.<\/p>\n

On Wall St, with 30 mins to play, the S&P500 went from 0.2% before the decision to topping the 5,200 level and smashing a new intraday high.<\/p>\n

Via Google<\/p>\n

\u00a0<\/p>\n

The Nasdaq Composite also moved toward a record close, moving from a 0.4% advantage to one of more than 1.1%.<\/p>\n

The Dow Jones Industrial Average moved from a gain of 115 points, or 0.3% to adding well over 370 points, or 1%, to clock its own new record high.<\/p>\n

\u201cThe Committee does not expect it will be appropriate to reduce the target range until it has gained greater confidence that inflation is moving sustainably toward 2 per cent,\u201d the FOMC bank said.<\/p>\n\n

The decision to plan to cut rates three times before the end of the year reaffirms its previous forecast. That said, the central bank said it needs to achieve greater confidence that inflation is moving toward its target.<\/p>\n

After the two-day meet (March 19\u201320),\u00a0 the FOMC members*<\/strong> have to share their own best guess projections for everything from US real gross domestic product (GDP) growth, the jobless rate, inflation and for their own preferences for rate cuts (this is the famous dot plot) for each year from 2024 to 2026 and over the longer run.<\/p>\n

Ed: *<\/strong>know your US FOMC members: (Jerome H. Powell, Chair; John C. Williams, Vice Chair; Thomas I. Barkin; Michael S. Barr; Raphael W. Bostic; Michelle W. Bowman; Lisa D. Cook; Mary C. Daly; Philip N. Jefferson; Adriana D. Kugler; Loretta J. Mester; and Christopher J. Waller)<\/em><\/p>\n

If there\u2019s a Goldilocks zone for market expectations of the US central bank\u2019s decision, then the near \u2018copy and paste\u2019 nature of this March meeting to the previous FOMC get-together is probably it.<\/p>\n

Recent mixed economic indicators out of the States which seemed to offset a cracking economy with several sticky inflation reads will have moderated hopes of any fast-track rate cuts; that said, the so-called dot plot also shows the FOMC still largely envisions x3 rate cuts taking place sometime this year.<\/p>\n

\u00a0<\/p>\n

The FOMC \u2018dot plot\u2019 (March 19-20)<\/h2>\n\n

Ed: \u201cAppropriate monetary policy\u201d is basically \u201cthe future path of policy\u201d each FOMC participant \u201cdeems most likely\u201d.<\/p>\n

According to the dotty chart, the gathering of Fed officials still expect to cut interest rates by around three-quarters (75 basis points) of a percentage point by the end of the year, sticking with an earlier forecast despite the recent mixed economic data.<\/p>\n

However, they now see interest rates remaining a little higher for a little longer over the following (2025-2026) years.<\/p>\n

This is a cool chart (if monetary policy is your bag), which the Fed releases alongside the other projections\u2026<\/p>\n

x<\/p>\n

In the post-match press conference, chair J. Powell acknowledged that overall inflation remains too high, but that price growth has \u201ceased notably.<\/p>\n

As expected Powell also put a lid on ideas that the FOMC might be twitchy about getting rates back on the downward cycle before the central bank\u2019s job of stifling rising prices was achieved.<\/p>\n

\u201cStraying too soon or too much (could) ultimately require even tighter policy to get inflation back to 2%,\u201d Powell warned.<\/p>\n

The US Financial sector was Wall Street\u2019s main beneficiary overnight. The sector led gains following the decision, with traders betting on the confidence of a US economy continuing to grow.<\/p>\n

<\/span><\/p>\n

The post US Fed holds, Wall Street explodes<\/a> appeared first on Stockhead<\/a>.<\/p>","protected":false},"excerpt":{"rendered":"

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