All of the positive economic talk out of this week’s Federal Reserve meeting had a negative impact on investors, who have now taken expectations for even one interest rate cut this year off the table.
In his post-meeting news conference, Fed Chair Jerome Powell took an upbeat view of current conditions, even with what he termed “zero” net job growth and inflation staying above the central bank’s 2% target. Powell called economic growth “solid” and rejected any notion that stagflation was taking hold.
Though the Federal Open Market Committee statement noted “uncertainty” associated with the Iran war, Powell never addressed it directly. With hostilities escalating in the Middle East and the Fed seemingly not inclined to react, investors took a dim view of the prospects of easier monetary policy.
Rather than rally on the central bank’s apparent optimism, stocks moved lower. Equity index futures also were negative Thursday morning.
The moves coincided with another adjustment in fed funds futures markets that put the odds of even a quarter percentage point reduction in the Fed’s benchmark interest rate at just 17.2% around 8:50 a.m. ET Thursday, according to the CME Group’s FedWatch analysis.
