Fed holds rates steady, offers no new guidance on balance sheet


NEW YORK (Reuters) – The Federal Reserve held interest rates steady on Wednesday at its first policy meeting of the year, with officials pointing to continued moderate U.S. economic growth and a “strong” job market.

FILE PHOTO: The Federal Reserve Board building on Constitution Avenue is pictured in Washington, U.S., March 27, 2019. REUTERS/Brendan McDermid

The Fed’s policy-setting committee announced its unanimous decision to maintain the key overnight lending rate in a range of between 1.50% and 1.75%.

The Fed’s statement was little changed from the one issued after its December meeting, saying that the current federal funds rate was “appropriate to support sustained expansion of economic activity,” including ongoing job growth and a rise in inflation to the central bank’s 2% target.

MARKET REACTION:

STOCKS: U.S. stocks were steady, with the S&P 500 .SPX last 0.4% firmer. BONDS: The 10-year U.S. Treasury note US10YT=RR yield was steady at 1.6131 and the 2-year yield US2YT=RR was last at 1.4446.

FOREX: The dollar index .DXY was last up 0.09%.

COMMENTS:

CHRIS GAFFNEY, PRESIDENT OF WORLD MARKETS, TIAA BANK, ST. LOUIS

“The Fed’s going to remain on hold for the foreseeable future, as long as GDP growth and inflation doesn’t move outside of the bands that we’re stuck in, anchored right around 2%. The Fed is not going to get in the way of the markets. They will continue to fuel the equity market rally with lower interest rates, and as we get further into the year, it’s going to become harder and harder for them to make any interest rate moves because then it will be seen as political.”

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“For markets today, it should be positive. The Fed continues to support the markets with lower interest rates.”

KATHY JONES, CHIEF FIXED INCOME STRATEGIST, SCHWAB CENTER FOR FINANCIAL RESEARCH, NEW YORK

“This is about as neutral a statement as you could write.

“It might surprise a few people that they’re only talking about extending the repo operations through April. It makes sense because they have to get through tax day. But maybe that was a subtle hint that – don’t expect this to last forever.

“It will be interesting to see if there’s any insight in terms of how (the coronavirus) is affecting their thinking. I’m guessing we’re not going to know too much because they don’t know too much about it yet, so what could they really say with any conviction.”

PETER CARDILLO, CHIEF MARKET ECONOMIST AT SPARTAN CAPITAL SECURITIES IN NEW YORK:

“The one thing I was surprised by was that there was no specific mention of the coronavirus which could be a problem for the global economy. And there was no dissent. The vote was unanimous. That implies that the Fed is going to stay on hold here. Of course they always leave the door open.”

“Early in the day when the market was strong we turned around on the news that the number of virus victims in China had jumped. Maybe besides the fact there was no change in monetary policy, the fact the Fed didn’t go out of its way to hint at global economic weakness due to the virus could be a relief to the market.”



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