NEW YORK (Reuters) – The Federal Reserve left interest rates unchanged on Wednesday but took a major step towards lowering them in coming months in a policy statement that tempered inflation concerns with other risks to the economy and dropped a longstanding reference to possible further hikes in borrowing costs.
MARKET REACTION:
STOCKS: The S&P 500 extended declines and was recently down 0.9%
BONDS: The U.S. Treasury 10-year yield rose and recently stood at around 3.982%. The 2-year yield climbed and was recently at 4.279%.
FOREX: The dollar index pared losses and was last up 0.02%.
COMMENTS:
BRIAN JACOBSEN, CHIEF ECONOMIST, ANNEX WEALTH MANAGEMENT, MENOMONEE FALLS, WISCONSIN
“By saying the risks are in better balance, the Fed is taking baby steps to cutting. March is likely too soon for them to have enough confidence that inflation is moving sustainably to 2%, but it should be appropriate to taper quantitative tightening by then. The offramp from tightening is a long one.”
MICHAEL BROWN, MARKET ANALYST, PEPPERSTONE, LONDON
“A further dovish step from the FOMC this evening, as had been expected, with the policy statement no longer implying a tightening bias, and pointing to the next move indeed being a cut, with reference to “any adjustments” to the fed funds rate replacing the previous allusion to additional policy firming.”
“Nevertheless, it is clear that the Fed are in no hurry to ease as rapidly as the market prices, with further promising inflation data still required in order to unlock the first rate reduction, even if the FOMC’s aims are ‘moving into better balance’.”
ART HOGAN, CHIEF MARKET STRATEGIST, B. RILEY WEALTH, NEW YORK
“It’s very much as expected, there’s no indication of any imminent easing, so I think this is right down the middle of the fairway.”
“Not surprisingly, I don’t think the Fed wants to show their hand, especially, when they have a couple of months of data to collect before they need to. The good news is we can forget about any more tightening. The bad news it’s ‘when’, not ‘if’, they’re going to cut rates, and that ‘when’ has been pushed out to what had been the fringes of consensus.”
(Compiled by the Global Finance & Markets Breaking News team)
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