The FED chose to keep interest rates steady for the second meeting in a row, and the bond market failed hours after the decision.
The news titles on yesterday’s Fed meeting decision were highlighted as benign, cautious, and movingly careful. For the second meeting in a row, the U.S. central bank kept the benchmark interest rate steady. Investors bet that there will be no more interest hikes after this approach.
The Treasury yields fail, and the stock market rises, driving good stock market vibes for this month.
On Wednesday, the Federal Reserve chose to maintain interest rates within the range of 5.25% to 5.50%. This decision marks the second consecutive meeting without a rate hike, representing the longest period without an increase since the Fed initiated its vigorous rate hikes in March 2022. Additionally, Federal Reserve Chair Jerome Powell shared encouraging news about the economy, stating that a recession is not anticipated in the near term and that recent data, which exceeded expectations, should not be seen as problematic.
Still, despite the high hopes of pausing the interest rate hike cycle, the Federal Reserve and its chairmen are not sure yet whether the cycle will stop or not.
The Federal Reserve chairman, Jerome Pollwe, says, “We’re not confident that we haven’t, but we’re not confident that we have.” At the same time, Powell also focused on its department’s inflation rate goal by adding enough to bring down inflation to 2% over time.”
Polwe comments that came after the FED decisions took attention even more than the decision itself. The comments, even if they were confusing a bit, leave the possibility of more interest rate hikes in the future. That means tightening the consumer’s ability for an extra period.
What supports this theory is that the FED chairman added that there are two ways to deal with inflationary pressure. The first way, according to him, is the unwinding of the distortions to both supply and demand from the pandemic and the response to the pandemic. And the other way is to follow and impose a highly restrictive financial policy, which helps moderate demands and gives the supply time to recover and fully function as it did pre-pandemic.
Meanwhile, on Wall Street, by keeping the interest rate study going in the last two meetings, investor hopes skyrocketed. So as the stock market closed, Wall Street main indexes closed higher on the last trading day, moving to close the weekend with positive gains.
In today’s session, the blue ship Dow gained 367 bps, approximately 1.09% higher. The S&P 500 benchmark was up by 1.4% to 4.297 bps, while the tech-heavy Nasdaq gained 1.3% to 13.230 bps.
In response to the FED decision, the bond market fell in Thursday’s session. The 10-year Treasury yields were down by 2.75% to 4.65%, the 30-year fixed mortgage rates plummeted by 3.2% to 4.61%, and the 5-year bonds declined to 4.62%.
Meanwhile, in the oil market, crude oil WTI prices were up by 1.52% to $82.1 per barrel, while Brent oil rose by 1.48% to $85.6 per barrel.