Sunday, 17 February, 2019

US Fed keeps interest rates unchanged, to be patient on future hikes

Wall Street climbs on Apple, Boeing results; Fed decision eyed Fed to be "patient" with rate changes
Laurie Berry | 31 January, 2019, 20:40

A separate statement from the Fed Wednesday said it is open to changing the size of the balance sheet if economic conditions warranted "more accommodative monetary policy" than just lowering the federal funds rate.

Taken together, the balance sheet announcement and the shift on rate hikes was meant to convey maximum flexibility from a central bank buffeted in recent weeks by financial market volatility, signs of a global economic slowdown and a partial U.S. government shutdown that clouds the economy.

Of course, the Fed didn't specifically say that its campaign to bring interest rates back to more normal levels was over. But in his press conference, Powell also denied the Fed's shift was in response to political factors, notably President Donald Trump's criticism of the central bank's rate increases and draining of liquidity from its balance-sheet shrinkage.

Investors expect the central bank to keep its rates on hold but will be looking for Powell to confirm that any further hikes will be gradual.

After nine increases since the end of 2015, its target for the federal funds rate - the basis for the cost of credit card borrowing and auto loans - stood at 2.25 percent to 2.5 percent, compared with 0.5 percent three years ago.

The day started with stronger-than-expected results by "big hitters" such as Boeing and Apple after markets closed on Tuesday.

The policymakers also said they're prepared to slow the reduction of their bond holdings if needed to help the economy.

The Fed's two main goals are maximum employment and price stability.

Officials at the United States central bank cited muted inflation and "global economic and financial developments" to explain the shift.

Coutinho nets 2, Barca routs Sevilla 6-1 to reach Copa semis
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Read: We're good for now.

The Fed raised rates four times last year including in December, when it signaled it would do so twice more this year.

Taken together, these seemingly contrarian numbers - solid domestically but weak internationally - have led the Fed to dramatically change its stance on the path of interest rates.

The Federal Reserve's announcement was the first meeting after the government shutdown, which limited some of the economic data the government was able to get.

Anthem Inc jumped 10.3 percent after the health insurer topped quarterly profit estimates and said it was speeding up the launch of its in-house pharmacy benefits management business.

The decision comes after Chairman Jerome Powell's remarks earlier in January assuring that officials will be patient in raising rates helped to calm investors, who had perceived he was overly dismissive of sharp stock drops and volatility.

The Dow Jones index jumped 423 points, or 1.7 per cent, to 25,002 at 3:20pm (New York time). The Nasdaq gained 71 points, or 1 percent, to 7,100.

It may not be long before that record is broken. Both market moves have been bullish for gold prices.

Bangsund added that markets were helped by renewed optimism for some sort of clarity or diffused tension ahead as US and Chinese trade negotiators have begun to meet.

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