S&P 500 is in the red at writing after the Federal Reserve left its benchmark overnight borrowing rate unchanged again.
Why did FOMC not cut interest rates today?
Note that the U.S. central bank has kept interest rates in the range of 5.25% and 5.50% – the highest level in more than two decades since July of 2023.
The FOMC statement attributed today’s decision to a “lack of further progress” in bringing inflation back to the 2.0% target. Rates cuts remain unlikely until members of the federal open market committee have “greater confidence that inflation is moving sustainably toward 2 percent”, it added.
Watch here: https://www.youtube.com/embed/gLaiNyYaeBA?feature=oembed
Earlier this week, the U.S. Bureau of Economic Analysis said the core personal consumption expenditures price index was up more than expected in March (read more).
S&P 500 is currently up about 7.0% versus the start of 2024.
Fed to trim bond holdings at a slower pace
The U.S. Federal Reserve has been reducing bond holdings at the pace of $60 billion per month. From June, however, it will ease that pace to $25 billion after the FOMC voted in favour of cutting the monthly cap on Treasuries on Wednesday.
The aforementioned move is synonymous to incremental easing of monetary policy. Also today, the post-meeting statement reiterated pace of economic growth as “solid”, the job market “strong”, and unemployment “low.
The interest rate decision arrives about a month after Oppenheimer raised its year-end target for the benchmark S&P 500 index to 5,500 which suggests a near 10% upside from here.
For us the big surprise this year has not been so much the resilience of the economy but rather the substantial capitulation among the bears and bearish community.
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