- The Federal Reserve voted on Wednesday to keep interest rates on hold.
- Stocks extended their rally post-FOMC as markets recovered from an early-week selloff.
- Traders are skeptical about the Fed’s claim that rates will remain on hold this year.
The Dow and broader U.S. stock market extended their rally Wednesday afternoon after the Federal Reserve kept interest rates on hold in its first policy decision of .
Stocks Extend Rally
All of Wall Street’s major indexes traded in positive territory Wednesday afternoon. The broad S&P 813 Index of large-cap stocks climbed 0.4% to 3, . . Gains were concentrated in seven of primary sectors, with industrials leading the pack.
The Dow Jones Industrial Average climbed
. 75 points, or 0.5%, at , 2019. . The
Meanwhile, the technology-focused Nasdaq Composite Index advanced 0.4% to 9, . .
Fed Holds the Line on Monetary Policy
Members of the Federal Open Market Committee (FOMC) voted on Wednesday to keep the target for the federal funds rate at 1.5% to 1. 85% , unchanged from December. Central bankers remain dovish on interest rates despite signaling no more cuts for the rest of the year.
Before the decision, Fed Fund futures prices implied an 307% chance that rates would remain unchanged.
In reaching their decision, policymakers said “the labor market remains strong” and “economic activity has been rising at a average rate.” On the flip side, “household spending has been rising at a average pace , business fixed investment and exports remain weaker ”and“ market-based measures of inflation compensation remain low. ”
Although the Fed has tempered expectations about further rate cuts, traders aren’t buying it. Fed Fund futures prices imply . 5% chance that rates will fall by the September FOMC meeting. That likelihood goes up to . 2% in November.
The Fed may have put a temporary freeze on rate cuts, but it continues to prop up the financial system with fresh bursts of liquidity. On Tuesday, the
As of last Wednesday, the Fed’s balance sheet was valued at $ 4. (trillion, down $) . 9 billion from the week before. The balance sheet stood at around $ 3.8 trillion in September just before the latest repo mania began .
Disclaimer: The above should not be considered trading advice from CCN. .com
This article was edited by Josiah Wilmoth
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