NEW YORK, The Federal Reserve kept its benchmark interest rate constant on Wednesday, as predicted, and signalled that while a rate cut is likely to be the next move, further progress on inflation is not certain.
As a result, U.S. markets ended the day neutral.
The Dow Jones Industrial Average had a little gain at the close, but the S&P 500 and the Nasdaq saw declines.
At the end of its two-day meeting to discuss monetary policy, the Federal Open Markets Committee unanimously decided to maintain the Fed funds target rate between 5.25% and 5.50%.
The accompanying statement left the timing of any rate cut in doubt, and Fed officials underscored their concern that the first months of 2024 have done little to build the confidence they seek in falling inflation.
At the subsequent press conference, Fed Chair Jerome Powell suggested that while the central bank remains focused on bringing inflation back to its 2% target, he noted progress toward that goal and dismissed the notion of an imminent rate hike.
“Powell didn’t rock the boat very much,” said Ryan Detrick, chief market strategist at Carson Group in Omaha. “He acknowledged that inflation is still a problem but remained optimistic that it will improve over the coming quarters.”
“What sparked today’s rally was when he said the next move will not be a hike,” Detrick added. “He pushed back against that, hard. … That allowed the bulls to take charge.”
The S&P 500 index’s 310 businesses have already released their first quarter reports, easily surpassing the halfway mark of the reporting season. LSEG reports that 77% of those reported earnings that exceeded expectations.
According to LSEG statistics, analysts now see overall first-quarter S&P 500 earnings growth of 6.6% year over year, a notable improvement over the 5.1% projection as of April 1.
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