Wall St Ends up Sharply after Fed Signals Patience

The Fed Is Meeting Again. Here’s What to Expect

The Federal Reserve is pausing to refresh the bull market in asset prices, upon which the economy has come to depend.

Federal interest rates will remain the same for now, the Fed said Wednesday.

With the Fed decision out of the way, investors focused their attention on a pivotal round of high-level U.S.

The Federal Reserve held interest rates steady on Wednesday but said it would be patient in lifting borrowing costs further this year as it pointed to rising uncertainty about the USA economic outlook.

"Given the renewed weakness for the dollar, if the jobs and wages data were to disappoint expectations badly then this will further reinforce the Fed's cautious outlook on the economy and reduce the possibility of rate increases even further", said Fawad Razaqzada, market analyst at Forex.com in London.

The central bank said in its statement that it's ready to use all its tools - including an adjustment to its bond portfolio - if it decided the economy needed more support.

"The case for raising rates has decreased somewhat", Fed chairman Jerome Powell said at a news conference following the rate announcement.

The balance sheet, another concern for investors, was addressed in a separate statement in which the Fed said it "is prepared to adjust any of the details for completing balance sheet normalization in light of economic and financial developments".

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And that would appear to relate to the stock market's downdraft.

The S&P communications services sector surged 3.76 per cent, leading gains among the 11 major S&P sectors, thanks to Facebook, Alphabet and Charter Communications Inc.

Consistent with that, Deutsche Bank Chief International Economist Torsten Slok wrote of declining interest in buying automobiles and homes, especially among high-income groups, the ones most affected by swings in the stock market. December 2018 was the worst month for home sales since 2015, according to the National Association of Realtors.

Powell previously indicated a shift in the Fed's stance in an appearance January 4, and the results have been evident. JPMorgan strategists still expect the central bank to resume tightening after mid-2019, but recommend that investors unwind their bets for the United States five- to 30-year yield curve to flatten.

But the decision comes amid volatile financial markets and a cooling US housing market. In early October, Powell indicated the Fed was far from reaching a neutral fed-funds rate, setting the stage for the risk markets' swoon.

The Dow is up nearly 15 percent since its recent trough on December 24.

"Overall this signals the Fed will not be on autopilot going forward", said Justin Lederer, Treasury analyst at Cantor Fitzgerald in NY.

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