Fed Issues Unanimous Vote for Pause, Future Rate Hikes Remain on the Horizon

KEY POINTS:

• All Fed members agreed with taking a pause, not hiking rates at all today.
• Most Fed members see at least two additional quarter point rate hikes coming later this year, and some see as many as four more rate hikes coming in total.
• Following the 2PM release of the decision, markets got washed out. The S&P, Nasdaq, Dow, and Russell were all firmly in negative territory.
• When Powell took the stage, he told the markets he does not see any rate cuts taking place this year. Prior to this meeting, a third of the market believed the Fed would cut rates.
• Powell, however, had a calming effect on the market when he said that unemployment doesn’t necessarily have to fall “that much” in order for the Fed to reach its goal of 2% inflation.
• According to the Truflation report, inflation is currently sitting at 2.53%. Of course, this isn’t the inflation report that the Fed follows, however this is a “real time” attempt at gauging inflationary pressures, relative to the CPI and other Fed metrics, which work with a lag.
• Despite many Fed members issuing hawkish predictions about the future of rate hikes, Powell said that no decisions had been made going forward for the future meetings. Powell only said that the Fed would continue to be data dependent, and that July would be a “live meeting.”
• Following Powell’s comments, the markets bounced from their lows, with the S&P 500 finishing the day flat.
• One stock that shrugged off the chop: Nvidia. Nvidia hit a new all time high today, never really falling with the rest of the market, and surged at the end of the day to finish the day +4.81%, at $429.97. After hours, Nvidia is up an additional 0.55% on top its daily gains.

The Fed’s “Hawkish Pause”

In a highly anticipated meeting held today, the Federal Reserve (Fed) announced a unanimous decision to maintain the current interest rates, opting for a pause in their tightening cycle. The outcome of the meeting has significant implications for the trajectory of the economy and financial markets.

All Fed members concurred on the importance of maintaining the status quo, refraining from any rate hikes during this session. However, it is noteworthy that the majority of officials foresee the possibility of at least two additional quarter-point rate increases later in the year. Some members even anticipate a total of four more rate hikes in the foreseeable future.

Following the 2PM release of the decision, financial markets experienced a sharp downturn. The S&P, Nasdaq, Dow, and Russell all plunged deeply into negative territory, reflecting the uncertainty and concern surrounding the Fed’s monetary policy.

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During the subsequent press conference, Federal Reserve Chairman Jerome Powell cleared up the market’s rate cut misconception by stating that he does not envision any rate cuts taking place within this year. Prior to the meeting, there was speculation among approximately a third of market participants that the Fed might implement rate cuts.

Despite saying that no rate cuts were coming any time soon, Chairman Powell’s remarks had a calming effect on the market as he expressed that the Fed’s goal of achieving 2% inflation does not necessarily require a substantial decrease in unemployment. This statement aimed to alleviate concerns that a significant rise in joblessness might be necessary to achieve the desired inflation target.

According to the Truflation report, inflation is currently recorded at 2.53%. It is important to note that this report does not align with the inflation measurement utilized by the Fed, which operates with a time lag. Nonetheless, the Truflation report provides a real-time assessment of inflationary pressures, relative to the Consumer Price Index (CPI) and other Fed metrics.

Despite some Fed members expressing hawkish predictions about future rate hikes, Chairman Powell emphasized that no final decisions had been made regarding future meetings. Powell reiterated the Fed’s commitment to data dependence, underlining that the upcoming July meeting would be “live” and subject to ongoing evaluation of economic indicators.

Following Chairman Powell’s comments, the markets rebounded from their earlier lows, with the S&P 500 ending the day unchanged. However, amidst the market volatility, one standout performer was Nvidia. The technology company defied the market’s downward trend, hitting an all-time high and closing the day with a remarkable 4.81% gain at $429.97. In after-hours trading, Nvidia continued to demonstrate strength, gaining an additional 0.55%.

Today’s events underscore the importance of identifying resilient performers during periods of market weakness. Nvidia’s impressive performance serves as a testament to this strategy, rewarding bullish investors who remained steadfast amid market turbulence.