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Federal Reserve leaves US interest rates on hold and promises to be 'patient' - live
Stocks surge as Fed leaves US interest rates on hold and promises 'patience' - live
(34 minutes later)
Q: Have you just caved to President Trump?
All we care about is using our tools to help the American people, Powell replies in a particularly serious tone. We don’t get involved in politics.
We’re human, we make mistakes, but we don’t make mistakes of character or integrity.
Q: Have we reached the end of the US rate-hiking cycle, rather than simply pausing it?
Powell says we’ll only know in hindsight.
Q: What’s changed since the Fed’s last meeting, just six weeks ago (when Powell was predicting gradual rate hikes)
Powell says recent data have shown that the slowdown in China and Europe has continued.
He also cites the US government shutdown, saying it will have “some impact on first-quarter US GDP”.
But if the shutdown row is now over, then much of that lost activity should be clawed back.
Q: Has the Fed considered changing the pace of unwinding its asset purchase scheme?
Powell insists that no decisions have been taken, but discussions are underway [the issue here is how large the Fed’s balance sheet should be in the long term]
Q: Your statement talks about adjustments, so might the next interest rate move be up, or down?
It depends entirely on the data, Powell says, adding that the ‘cross-currents’ facing America could be with us for a while.
FOMC statement refers to "adjustments" to rates. Rich Miller asks if that means rates are as likely to go up as down. Powell comes close to suggesting that Fed doesn't know if next move will be up or down.
Asked about economic risks (such as Brexit, and trade wars), chairman Powell says Fed officials believe the economic outlook is “still solid”.
Q: Are US interest rates now at neutral? (ie, neither stimulating nor holding back the economy?).
Powell says policy is ‘appropriate’, adding that the Fed funds rate is within the ‘range’ of neutral.
“We think our policy is at the appropriate point,” Powell says, indicating that the Fed isn’t sure anymore whether it’s still helping to boost the economy.
Fed funds rate is now in the range of the FOMC's estimates of neutral, Fed's Powell says at press conference.
Dow up over 400 points as Powell says the case for raising rates has weakened and the Fed is taking a "wait and see" approach
Powell says the case for further interest rate rises has ‘weakened somewhat’, as inflationary pressures have declined.
Pretty dovish stuff from Fed Chair Powell so far: - Case for raising rates has weakened somewhat - Risk of too high inflation has diminished
Federal Reserve chair Jerome Powell is holding a press conference now.
Powell gives a recap of the Fed’s meeting.
He says the Fed’s mission is to “sustain the economic expansion with a strong jobs market and stable prices, for the benefit of the US people.”
The US economy is in a good place, and we’ll use our tools to keep it there, Powell pledges. He says the jobs markets looks strong, and inflation is close to target.
Looking ahead.... the Fed expects the US economy to do well in 2019, but not as fast as the very strong growth in 2018.
But growth has slowed in China and Europe, and there is uncertainty over Brexit, trade discussions, and the US government shutdown.
These ‘cross-currents’ could hurt the US economy. So the Fed has decided to be patient - basically, wait and see how conditions play out.
Markets agree that Patience is a virtue. #Fed $SPY
Markets agree that Patience is a virtue. #Fed $SPY
....and a buying opportunity.
....and a buying opportunity.
Candice Bangsund, Vice President and Portfolio Manager at Fiera Capital, predicts the Fed will leave US interest rates unchanged until at least July.
Candice Bangsund, Vice President and Portfolio Manager at Fiera Capital, predicts the Fed will leave US interest rates unchanged until at least July.
We expect the Fed to take a pause and remain sidelined through the first half of the year in order to monitor the evolution of the macroeconomic landscape and recommence with two more rate hikes in the back half of the year.”
We expect the Fed to take a pause and remain sidelined through the first half of the year in order to monitor the evolution of the macroeconomic landscape and recommence with two more rate hikes in the back half of the year.”
The Fed has turned cautious, says Nancy Curtin, chief investment officer at Close Brothers Asset Management:
“After taking a gradual approach to interest rates last year, the Fed has become more cautious still and moved back into wait-and-see mode. A slowdown in global growth and market volatility has caused some concern.
However, should trade negotiations with China and the outlook for growth improve, the combination could lead to a better second quarter for the economy, giving Powell more confidence to normalise monetary policy.
Here’s a neat summary of the Fed’s new message:
#Fed #FOMC statement:- fed funds rate range unchanged 2.25-2.5%- removes forward guidance: "judges that some further gradual" rate hikes likely- removes "balanced risks"- "patience" given global economic & financial developments- "muted #inflation" & anchored expectations" pic.twitter.com/E28zwM78cI
The dollar is weakening against other currencies - another sign that the markets believe the Fed is less likely to raise interest rates anytime soon.
Dollar spot index after Fed headlines. pic.twitter.com/KIhTlLUYuM
DOLLAR HITS SESSION LOW VS EURO AFTER DOVISH FED STATEMENT
Shares are rallying on Wall Street, as investors cheer the Fed’s pledge to be ‘patient’ before raising interest rates again.
The Dow Jones industrial average has jumped 261 points, or over 1%, to 24,841 points.
Dow jumps 1.5% as balance sheet flexibility is just the dovish stance equity investors will love. FOMC holds rates as expected, unanimous but Fed removes reference to further gradual rate increases. Fed says it’s prepared to adjust balance sheet normalization. pic.twitter.com/Ka2gIs2tv5
Significantly, the Fed has changed the language in its monetary policy statement - dropping its guidance that ‘further gradual’ rate rises will be needed.
Here's what changed in the @federalreserve's January statement https://t.co/e7BlX0F2Op pic.twitter.com/vlKfqMwGLc
Newsflash: The US Federal Reserve has voted to leave interest rates on hold today, at their current level of up to 2.5%.
And more significantly, the Fed has dialled back its predictions of future rate hikes in 2019.
Pointing to uncertainty over the US economy, the Fed said it would be ‘patient’ before raising interest rates again (following heavy pressure from President Trump).
The Fed says:
“In light of global economic and financial developments and muted inflation pressures, the committee will be patient [when determining future rate adjustments.”
After a mixed day for European stock markets, Britain’s FTSE 100 has closed 107 points higher at 6,941 - a gain of 1.6%.
France’s CAC also did well, gaining almost 1% after the French economy grew faster (+0.3%) in the last quarter.
Germany’s DAX lost 0.3%, though, while Spain’s IBEX shed 0.5%.
Fiona Cincotta, senior market analyst at City Index say:
Markets breathed a sigh of relief over Apple’s results and encouraging China related news, which overshadowed rekindled Brexit nerves.
As usual the multinationals on the FTSE, which also book revenue in dollars, were fairing well, whilst the more domestically focused firms lagged behind.
In New York, Apple’s shares have jumped almost 5% after the tech giant reported falling revenues and profits, but not as low as feared.
Apple reports first decline in revenues and profits in over a decade
Over in Greece the ripple effects of the country’s successful bond sale yesterday – the first since Athens exited its final bailout program – continue to be felt today with yields on Greek bonds falling sharply. Yields on five-year bonds struck a six-month low of 2.928% in what analysts were interpreting as further good news for prime minister Alexis Tsipras, as he basks in global praise for successfully ending the decades-long name row over Macedonia which had helped clear the way for Tuesday’s bond sale
French president Emmanual Macron was the latest to praise the accord – ratified by the Greek MPs last week – an an example of problem solving at its best for Europe.
Tsipras, however, has not been as loudly applauded for his decision Monday to push ahead with an 11% increase of the minimum wage. That move is believed to conflict with the debt-stricken country’s low productivity rates, and which could yet test the patience of creditors still monitoring Athens’ fiscal progress.
Here’s our economics correspondent, Richard Partington, on today’s UK credit figures:
The boom in consumer borrowing across Britain has cooled to the slowest annual growth rate in four years, according to official figures, as households rein in their spending.
The Bank of England said annual consumer credit growth slowed to 6.6% in December, continuing a trend for weaker levels of household borrowing on credit cards, personal loans and car finance deals.
In a reflection of the slowdown in consumer spending over the key festive shopping period, the amount borrowed last month dipped to £700m, below the average £1bn per month for the previous six months.
The Bank said credit card borrowing was particularly weak, with only £100m put on plastic last month compared with an average of about £300m per month since July....
More here:
UK shoppers rein in credit card use amid fears over economy
Fast food chain McDonalds has just beaten Wall Street forecasts, thanks to strong international growth (although the US market lagged behind).
McDonalds posted earnings per share of $1.97, beating forecasts of $1.89. Revenues were slightly ahead of estimates, at $5.163bn, with global like-for-like sales up 4.4%.
In the UK, McDonalds has posted more than 10 years of growth in a row (going back to the financial crisis).
Paul Pomroy, CEO of McDonald’s UK and Ireland said:
“2018 was a strong year for our business; together with our franchisees, we served over a billion customers, closed the year with a record-breaking month in December, and have now delivered 51 consecutive quarters of sales and guest count growth. We are pleased to be succeeding by continuing to listen and invest in what customers want: choice, value and convenience, and doing right by our people.
Perhaps surprisingly, coffee is now a huge area - with coffee drinkers the most frequent customers. A London-based barista trial is now being expanded to the Midlands...
