Rate Hike 'Unlikely' in This Cycle, Powell Says

You can rewatch the full press conference above. 

While Federal Reserve Chair 𝔍Jerome Powell downplayed the possibility of rate cuts anytime soon, rate hikes don’t seem to b🥂e in the cards either. 

“I think it's unlikely that the next policy rate move will be a hike,” Powell told reporters at Wednesday’s post-FOMC-statement press conference.

Powell’s remark contrasts with Fed Governor Michelle Bowman, a voting member of the Fed’s policy committee, who earlier this month raised the poꦏssib✨ility of hiking the fed funds rate again, in response to inflation that stubbornly resisted falling in the first quarter.

The Fed hasn’t touched the rate since last July, when it capped off a rate hike campaign that began in March 2022 by raising it for an 11th time to its highest since 2001.

U.S. Economy in Stagflation? ‘I Don’t See The Stag Or The Flation,’ Powell says

Federal Reserve chair Jerome Powell waved away concerns that the U.S. economy is in a 澳洲幸运5官方开奖结果体彩网:state of stagnation while having too high inflation, a doomsday economic scenario known by the portmanteau “澳洲幸运5官方开奖结果体彩网:stagflation.”

When asked about such a possibility by a reporter, Powell pointed out that inflatiꦍon is far lower than in the infamous episode of stagflation in the 1970s, while unemployment is near historic lows.

“I don’t see the stag or the flation, a🔥ctually” he said.

Fears of stagflation were stoked last week when the ♐澳洲幸运5官方开奖结果体彩网:first quarter g🐟ross domestic product report 🦩showed economic growth weakening and inflation higher than economists predicted.

Economists Surprised By Fed's Lack of Hawkish Language in Statement

Economists thought the Fed could have been more hawkish in tone in their pre🔯pared statement following their meeting.

Below we have compiled economists' reactions to today's announcement and Powell's presser. This post will be updated as new analysis comes in.

Powell Dials Back Talk Of Rate Cuts

Talk of the Federal Reserve cutting its key interest rate this year was conspicuously absent from Federal Reserve Chair Jerome Powell’s prepared remarks in a press conference following the Fed’s offic🎶ial announcement on its interest rate decision.

Earlier this year, Powell had said the fed funds rate was likely at its peak, and the Fed was weighing when to cut rates. But three months of worse-than-expected inflation d🌜ata at the start of the year has shifted his stance to one of keeping rates higher for longer until inflation is quelled.

“My colleagues and I today said that we didn’t see progress in the first quarter,” he told rep💛orters who asked him about the omission. “And I’ve said that it appears then that it’s going to take longer for us to reach 💦that point of confidence. So I don’t know how long it will take. When we get that confidence, then rate cuts will be in scope.”

Powell Says Committee Is Still Searching For Confidence That Inflation Is Falling

The setbacks in the central bank's fight against inflation so far this year are likely to keep the fed funds rate higher for longer than previously thought, Federal Reserve Chair Jerome Powell said at the beginning of his press conference.

"We've stated that we do not expect that it will be appropriate to reduce the target range for the federal funds rate until we have gained greater confidence that inflation is moving sustainably toward 2%," He said. "So far this year, the data have not given us that greater confidence. ...It is likely that gaining such greater confidence will take longer than previously expected."

Markets Stutter After Fed Outlines Plans to Slow Decline in Security Holdings

U.S. stocks briefly spiked and then fell, resulting in a mixed outcome Wednesday after the Federal Reserve's announcement.

The Dow Jones Industrial Average traded 0.4% higher Wednesday afternoon, while the 澳洲幸运5官方开奖结果体彩网:Nasdaq Composite slipped 0.1% and the 澳洲幸运5官方开奖结果体彩网:S&P 500 dropped 0.2%.

Investors seemed particularly interested in the 澳洲幸运5官方开奖结果体彩网:Federal Open Market Committee's plans to slow the pace of 澳洲幸运5官方开奖结果体彩网:balance sheet run-off, one aspect of easing monetary policy, in June.

The central bank said it was slowing down the pace at which it was selling off securities from its balance sheet to $25 billion per month from $60 billion per month. This process, 澳洲幸运5官方开奖结果体彩网:known as "quantitative tightening," removes money from financial markets. This𝐆 is a reversal of the "quantitative easing" campaign it engaged in during the pandemic, when it did the opposite, buying assets such as mortgage-backed securities in order to stimulate markets, and the economy, with more ꦅmoney.

Market participants will likely pay particular attention to Chair Jerome Powell's press conference to glean more insight into the path ahead for officials.

Fed Adds Language About Inflation's Path So Far This Year To Statement

In their official statement, the Federal Open Markets Committee officials acknowledged progress against inflation has stalled, necessitating holding interest rates high to discourage borrowing and spending and cool down the economy.

“In recent months, there has been a lack of further progress toward the Committee's 2% inflation objective.” the Federal Open Market Committee said in a statement, adding language that was absent from the statement the group made when it previously met in March.

Fed officials spend a good portion of their meetings 澳洲幸运5官方开奖结果体彩网:crafting the statement to strike the exact right tone they want to convey ﷽to markets, former members of the😼 committee have said.

This month's statement also de-emphasized inflation's movements over the year and prioritized the long-term progress that has been made.

Federal Reserve Leaves Interest Rates Higher-For-Longer As Predicted

It wasn't too long ago that many forecasters thought today's meeting would be the last time interest rates would be held at their more than two-decades high.

Today, the Federal Reserve held their interest rates at the current level of 5.25% to 5.50%, however, it likely will stay there for much longer. Fed officials are content to keep the interest rate higher for longer on the back of surprisingly♏ strong inflation data that has remained stubborn so far this year, as forecasters expected headed into the meeting.

"The Committee does not expect it will be appropriate to reduce the target range until it has gained greater confidence that inflation is moving sustainably toward 2%," officials said in their statement.

Before the decision was released, traders were pricing in a 6.4% chance the Fed would lower its influential fed funds rate in June and 20% in July and 44% for August, according to the CME Group’s FedWatch tool, which forecasts rate movements based on fed funds futures trading data.

Immediately after the decision, those chꦰances were 6.4%, 21.8% and 46.9% respectively.

Read more about the decision here.

Hiring, Firing, And Quitting All Fell In March As Labor Market Shows Signs of Gridlock

The labor market may be hot by historical standards, but it’s getting colder for job seekers, who saw the pickings in “help wanted” ads get slimmer, while fe🐲wer people were hired, fired, or switꦆched jobs. 

There were 8.5 million job openings that month, down from 8.8 million in February, and the fewest since February 2021, the Bureau of Labor Statistics said Wednesday. That was less than the 8.7 million forecasters had expected according to a survey of economists by Dow Jones Newswires and the Wall Street Journal. It meant there were 1.3 job openings per unemploy🅺ed worker, slightly above the ratio of 1.2 that was typical just ahead of the pandemic. 

Overall, the report painted a picture of a labor market where more people a🔯re increasingly stuck in place, with hiring, firing, and quitting all declining.

“Low hires, quits and layoffs are an unusual combination that p﷽oints to a certain ‘lock-iജn’ in the job market,” Daniel Zhao, lead economist at job site Glassdoor, posted on social media platform X. 

Read more about how the labor market could be entering into a gridlock here.

Higher Commodity Prices Weigh on Manufacturing Sector

Activity in the manufacturing sector stepped back in April, with the latest surveys showing a drop in new orders and increasing commodityඣ prices, showing inflation pressures may be pushing on the manufacturing sector. 

The S&P Global Manufacturing 澳洲幸运5官方开奖结果体彩网:Purchasing Managers Index (PMI) came in at 50.0 to indicate no change in business conditions in April, breaking a three-month streak of improving conditions. Meanwhile, the 澳洲幸运5官方开奖结果体彩网:Instituꦓte of Supply Management’s (ISM๊) manufacturing survey registered 49.2% in April, a drop of more th🥂an one percentage point from March. 

“Business conditions stagnated in April, failing to improve for the firstꦇ time in four months and pointing to a weak start to the second qua🤪rter for manufacturers,” said Chris Williamson, S&P Global chief business economist.

By dropping below 50%, the ISM survey showed a manufacturing sector where business was contr🐟acting, driven lower by a drop in both new orders and exports.

“The U.S. manufacturing sector dropped back into contraction after growing in March, the first time since Septem🍎ber 2022 that the sector reported expansion,” said Timothy R. Fiore, chair of the ISM Manufacturing Business Survey Committee.

There were indications that prices contiꩵnued to increase, with the S&P Global survey showing a sharp increase in input costs, while the ISM report showed its prices index moved higher as commodity costs continued to climb.

“From an 澳洲幸运5官方开奖结果体彩网:inflation perspective, it was also reassuring to see ༺prices charged for goods rise at a slower rate than the 11-month high seen in March,” Williamson wrote. “The rate of increase nevertheless remains elevated by historical standards—and well above the average seen in the decade prior to the pandemic—as firms continued to pass higher commodity prices on to customers.”

That could be bad news for the Federal Reserve, which is closely watching for indications of inflation as it 澳洲幸运5官方开奖结果体彩网:continues to receive data showing that prices a🌊re moving higher in 2024. 

-Terry Lane

Private Businesses Stayed In Hiring Mode In April

Private businesses hired at faster-than-expected pace in April, adding 192,000 jobs, down from the upwardly-revised 208,000 jobs added in March, payroll services company ADP said Wednesday.

Despite the slowdown, the hiring exceeded the 183,000 jobs that forecasters had expected according to a survey of economists by Dow Jones Newswires and the Wall Street Journal. Every industry added jobs other than information, which includes the media and telecommunications.

The jobs report stuck to the theme set by recent official government surveys on job growth, which have shown employers hiring at 澳洲幸运5官方开奖结果体彩网:a rapid pace in spite of high 澳洲幸运5官方开奖结果体彩网:interest rates set by the Federal Reserꦡv🧜e intended to cool the economy. Economists, however, typically take the ADP survey numbers with a grain of salt since they have a spotty track record when it comes to predicting what of꧂ficial numbers from the Bureau of Labor Statistics will show. 

The BLS jobs report, which comes out on Friday, is also 🐻expected to show the labor market staying hot. 

Mortgage Demand Lower as Rates Climb Again

Higher bo🙈rrowing costs continue to drive down demand for home loans, with the number of mortgage applicatio❀ns lower again this week.

Mortgage applications fell 2.3% compared with last week, the 澳洲幸运5官方开奖结果体彩网:second week of declining demand, according to data from the Mortgage Brokers Associat🍰ion. The drop was spurred by the fourth straight week of rising rates, with the 30-year, fixed-rate mortgage moving up to 7.29% its highest levels since November 2023. 

“Inflation remains stubbornly high, and this tꦺrend is convincing markets that rates, including mortgage rates, are going to stay higher for longer. No doubt, this is a headwind for the housing and mortgage markets,” said Mike Fratantoni, MBA senior vice president and chief economist.

Application volume for both purchases and refinancing were lower, with both below last year’s pace. As 澳洲幸运5官方开奖结果体彩网:mortgage rates moved higher this week,💮 so did the share of adjustable rate mortgages (ARMs), which are now 7.8% of mortgage applic🐽ations, its highest level in 2024.

“Prospective homebuyers are looking for ways to improve affordability, and switching to an ARM is one means of doing that, with ARM rates in the mid-6% range for loans with an initial fixed period of 5꧟ 𝓀years,” Fratantoni said. 

-Terry Lane