1 Min Ago
Fed decision is ‘commendation’ of economy, CIO says
Indications of interest rate cuts on the horizon from Federal Reserve officials underscores that the economy is better positioned with the central bank’s goals, according to Jon Maier, chief investment officer of Global X.
“The market is celebrating that the Fed dots moved closer to the markets,” he said. “This isn’t just a mere decision to maintain current rates; it’s a commendation for an economy that appears to be aligning with the Fed’s long-term objectives.”
— Alex Harring
14 Mins Ago
Economic growth has ‘slowed substantially’ in the fourth quarter, Powell says
Fed Chair Jerome Powell said that the central bank sees the U.S. economy losing steam in the final months of the year.
“Recent indicators suggest that growth in economic activity has slowed substantially from the outsized pace seen in the third quarter. Even so, GDP is on track to expand around 2.5% for the year as a whole,” Powell said.
Powell also said that activity in the housing sector has “flattened out” after picking up over the summer, and said that data suggested that higher rates are slowing business investment.
— Jesse Pound
16 Mins Ago
Fed Chair Jerome Powell says inflation has eased, though it remains elevated
Federal Reserve Chair Jerome Powell admitted the central bank’s efforts to cool inflation have started to take hold, though he reiterated there is still further to go.
“Inflation has eased from its highs, and this has come without a significant increase in unemployment. That’s very good news,” Powell said during a press conference.
“But inflation is still too high. Ongoing progress in bringing it down is not assured and the path forward is uncertain,” he continued.
Looking ahead to 2024, Powell stressed the central bank’s commitment to bringing inflation down to its 2% goal. He emphasized that restoring price stability is essential to achieve and maintain strong labor market conditions.
— Sarah Min, Jeff Cox, Pia Singh
17 Mins Ago
Fed cuts should start in June, says Goldman Sachs Asset Management
The Federal Reserve’s rate cut cycle will likely begin in June, said Whitney Watson, global co-head and co-chief officer of fixed income and liquidity solutions at Goldman Sachs Asset Management.
She anticipates a 25 basis point cut to start, with the central bank following a measured approach to reach a policy rate range of 4.25%-4.5% by the end of 2024.
“With potential downside risks to economic growth outweighing upside risks to inflation for the first time in several years, we believe there is a growing case for adding duration alongside exposure to high-quality fixed income assets in 2024,” Watson said.
— Michelle Fox
18 Mins Ago
See what changed in the new Fed statement
18 Mins Ago
The Federal Reserve has finally met the market, market pros say
Market participants cheered as equities rallied Wednesday afternoon, fueled by the Federal Reserve’s signal that it would ease interest rates moving forward. The Fed had also formally lowered its inflation forecast for 2024, forecasting a 2.4% rate down from 2.6%.
“The question going into this was is the Fed going to meet the market or is the market going to meet the Fed? It looks like the Fed has bridged that gap in terms of meeting the market at least three-quarters of the way on what was priced via the dot plot,” said Kristen Bitterly, Citi’s Global Wealth Head of North America Investment. Looking ahead to Powell’s conference, she asked, “is he going to make any comments given the market rally?”
John Bellows, portfolio manager at Western Asset, called the improvements on inflation “significant.” He added, “I think it’s mostly about inflation here, the tightening or loosening of financial conditions may or may not be appropriate, but as long as inflation is lower, that’s what the Fed is going to respond to…the news on inflation has been good, and they’re reflecting that here.”
Similarly, Greg McBride, chief financial analyst at Bankrate, said all indications point to the central bank being done raising interest rates.
To be sure, some aren’t entirely convinced, thinking the rally may be premature.
“I don’t think that they’re showing that they have, at this point at least, a real tight consensus on how many cuts next year,” said Dennis Lockhart, former CEO of the Federal Reserve Bank of Atlanta. “The markets have a tendency to get ahead of the policymakers.”
— Pia Singh
25 Mins Ago
Fed pivot could inversely dampen consumer borrowing, says JPMorgan’s David Kelly
The Federal Reserve’s pivot to undo its rate-hiking cycle is generally thought to stimulate the economy, but David Kelly believes that it could inadvertently hamper consumer borrowing.
“We waited a whole year for the Fed to pivot and finally as a Christmas present they gave us a pivot,” JPMorgan’s chief global strategist told CNBC’s “Power Lunch” on Wednesday. “I am a little worried that the most dangerous time for the economy is when a tight Fed begins to ease.”
That’s because consumers may delay their borrowing until a later date as they wait for interest rates to eventually come down. This effect, Kelly said, is “very bad for the economy.”
Ultimately, the Fed’s pivot is good news today for both the stock and bond market, the strategist said. “But I’m just a little bit more cautious on growth now that the Fed has finally pivoted.”
— Lisa Kailai Han
48 Mins Ago
Stocks pop following news that Fed sees 3 rate cuts in 2024
The major averages jumped upon the Federal Reserve’s announcement that three rate cuts are ahead in the new year.
The Dow Jones Industrial Average leapt more than 170 points or nearly 0.5% on Wednesday afternoon. The S&P 500 added 0.5%, and the Nasdaq Composite jumped 0.4%.
–Darla Mercado
52 Mins Ago
Federal Reserve keeps interest rate steady for a third consecutive time
Central bank policymakers have decided to hold the benchmark borrowing rate steady at a range between 5.25% to 5.5%.
The move was widely expected by markets.
Read more about the Fed’s decision here.
–Darla Mercado
59 Mins Ago
Where markets are before the Fed’s decision
The major averages are little changed in the run-up to the Federal Reserve’s announcement.
The S&P 500 is up 0.04%, while the Dow Jones Industrial Average is up 0.02%, as of 1:50 p.m. ET. The Nasdaq Composite is down 0.04%.
The 2-year Treasury yield is at 4.674%, hovering near its session low of 4.670%. The 10-year yield is also near its session low, trading at 4.164%.
The Dollar index is at 103.93, approaching its high of the session of 104.031.
–Darla Mercado, Gina Francolla
An Hour Ago
Don’t get your hopes up on big rate cuts in 2024, says Wells Fargo Investment Institute
Market participants are getting a little too excited about the prospect of sizeable rate cuts in the new year, according to Wells Fargo Investment Institute’s Scott Wren.
“The market is pricing in around 125 basis points of Federal Reserve cuts by the end of next year,” wrote the senior global market strategist in a note on Wednesday.
“That is overly optimistic in our opinion,” he said. “We do not think the Fed will deliver what the markets are pricing in.”
Instead, Wren anticipates the target range will end 2024 between 4.75% and 5%. Currently, the target rate is between 5.25% and 5.5%.
“Some progress on inflation has been made, and the labor market and the economy are gradually slowing,” Wren said.
–Darla Mercado
An Hour Ago
Fed’s dot plot could steal the show on Wednesday
The Federal Reserve’s move to hold rates steady for a third time isn’t the main event on Wednesday.
Instead, market participants are eager to see where the central bank stands on its projections for interest rates going forward.
That means the dot plot – the Fed’s grid of individual members’ outlook on interest rates – will be a key focus for traders.
The chart will likely show that the central bank dropped an expected rate hike for 2023, but what’s up in the air is the outlook for 2024 and beyond.
Read more about what investors are watching in the Fed’s announcement.
–Darla Mercado, Jeff Cox