The Federal Reserve met on Wednesday to discuss monetary policy and the strength of the U.S. economy.
In a mostly unsurprising decision, Chairman Jerome Powell and the Federal Open Market Committee (FOMC) decided to hold the money rate as it is today. This will provide stability to markets. Analysts believe that the Fed has plenty of breathing room, and an option to stimulate the economy should it slow in the final quarters.
Fed Open to Cutting Rates
The federal funds rate will be unchanged at a range of 2.25% to 2.50%. While some investors were banking on a cut, a stable rate is still good news. The Fed appeared open to cutting rates later in the year if necessary.
Sentiment within the FOMC is changing, with one voter proposing a rate cut. James Bullard, the President of the Federal Reserve Bank of St. Louis, was the sole member who recommended a rate cut of 0.25%.
A statement released by the Fed yesterday afternoon indicates that a rate cut would be considered if it meant propping up the economy. The statement said that “The committee will closely monitor the implications of incoming information for the economic outlook and will act as appropriate to sustain the expansion.”
The statement is a dead giveaway that the Fed would consider a rate cut.
The FOMC also reduced its rate expectation for next year. Members believe that a rate between 2.1% and 2.6% is likely for 2019.
How Did Markets Respond?
Investors were unsurprised by the Fed meeting, but still responded positively to the news. The Dow Jones Industrial Average, a major benchmark, was up 0.15% at the close of market on Wednesday.
The S&P 500, another major benchmark, was up 0.30%. The NASDAQ Composite Index grew the most, closing the day with a 0.42% gain.
Markets continued to show strong signs of growth on Thursday morning. All major indexes were up in the early hours of trading, with growth hovering around 0.70% across major indexes before lunchtime on Wall Street. If this momentum carries throughout the day, it will show that investors have welcomed the Fed’s latest decision.
This year’s sturdy growth market looks set to thrive in the summer, providing that trade tensions don’t escalate as they did in 2018.
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