U.S. Federal Reserve Chairman Powell: There isn't a strong case to move interest rates

May 3, 2019 Patrick Ercolano

           

As widely expected, the U.S. Federal Reserve once again left its key interest rate range unchanged at 2.25% to 2.50% and signaled that there are likely no changes to come in the near future.

The probability of a rate cut has been significantly reduced, thanks to supportive economic data such as solid gross domestic product growth, strong employment conditions and inflation that's in check. The Fed did note slowing household spending and business fixed investment in the first quarter.

"We think our policy stance is appropriate at the moment; we don't see a strong case for moving it in either direction" says Fed Chairman Jerome Powell.

Keeping the status quo

Wednesday's decision is expected to support the ongoing expansion of economic activity along with maintaining a strong labour market and inflation at the Fed's 2% objective.

Taking global economic and financial developments into account as well as muted inflationary pressures, the Fed is taking a wait-and-see approach which will determine any future adjustments to its target rate. The Fed will assess actual and expected economic conditions relative to its maximum employment and inflation objectives in deciding future interest rate changes.

No material change to our strategy

Relating to the announcement, the S&P 500 closed the day down (-0.75%) as market participants reacted to the "no rate cut in the near future" news. U.S. 10-year bond yields dropped prior to the announcement, but rallied to end the day. We also saw the U.S. dollar strengthen relative to most major currencies.

My team and I at MD Financial Management will continue to assess market conditions and make changes to our strategy when necessary. If you have any questions about the latest Fed announcement or about your investments, please reach out to your MD Advisor.

 

About the Author

Patrick Ercolano

Patrick Ercolano, CFA, MBA, is a Lead Portfolio Manager with the Investment Management and Strategy team at MD Financial Management. He oversees strategic and tactical asset allocation mandates, alternative investment mutual funds and is a member of MD’s Tactical and Risk Allocation Committee.

More Content by Patrick Ercolano
Previous Article
Canadian equities: Hitching a ride on a strong U.S. economy and a rebounding China
Canadian equities: Hitching a ride on a strong U.S. economy and a rebounding China

Canadian equities climbed to new highs shrugging off recent negative news. After being underweight for 21 m...

Next Article
Canadian real estate: A tale of two
Canadian real estate: A tale of two

We look at current real estate conditions in Canada and the different ways you can add this alternative ass...

×

Subscribe to our Newsletter

Thank you!
Error - something went wrong!