Economists and financial experts had varied reactions after the US Federal Reserve voted to leave interest rates unchanged. Though the Fed’s interest rates held steady, the US central bank gave hope to investors by potentially leaving the door open for a rate cut.
Fed reassured investors with dovish statement
Investors read a lot into the Fed’s statement that it would take action “to sustain the expansion” of the US economy. The Fed didn’t use the word ‘patient’ that it often used in past statements. By dropping that word from its current statement when speaking about setting policy, investors are hoping that the US central bank will be more proactive and cut interest rates in the future.
What do financial experts say about the Fed rate cut?
Gregory Faranello, head of US rates at AmeriVet Securities, believes that the Fed withstood pressure from US President, Donald Trump, who wanted the central bank to reduce interest rates. He noted that more disappointing economic data?could lead the Fed to implement rate cuts.
“The Fed opened the door for cuts. They maintained some independence from some of the outreach for lower rates coming out of the [Trump] administration. Short term, it’s going to depend on the data. If the data warrants a cut, the chairman is saying the Fed is prepared to adjust policy,” said Faranello.
Jason Pride, chief investment officer of private wealth at Glenmede, said a future interest rate cut “could be characterized as an “insurance” rate cut, a rate cut that is not justified by slowing economic growth but is instead meant to provide a measure of protection from potential but unpredictable risks.”
Fed chair, Jerome Powell, made comments in early June about the Fed possibly helping the US economy that drove the Dow Jones higher for the majority of the month.?Now investors will monitor how the Fed’s latest statement will influence the Dow Jones in the future.
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