US stocks, treasury yields, and Dollar closed lower following FOMC rate decision and post-meeting press conference. Although Fed opened the door for a possible pause in June, no confirmation was provided, and a rate cut by year-end was ruled out.
Despite softening its hawkish tone, Fed Chair Jerome Powell did not explicitly confirm a pause following yesterday’s 25bps rate hike. Powell noted that “we’re closer, or maybe even there” regarding the terminal rate of the current tightening cycle. From June onward, policy decisions will be made on a “meeting-by-meeting” basis, with Fed “prepared to do more” if necessary.
Powell also dismissed the possibility of a rate cut this year. He said, “We on the committee have a view that inflation is going to come down not so quickly, it will take some time,” and “in that world, if that forecast is broadly right, it would not be appropriate to cut rates” this year.
Regarding the economy, Powell expressed optimism, stating, “the case of avoiding a recession is in my view more likely than that of having a recession.”
Additional readings on FOMC:
- FOMC Signal a Conditional Pause
- Fed Review – A Balanced End to the Hiking Cycle
- FOMC Raises Rates by 25 bps But Signals “Hawkish Pause”
DOW is holding above 32233.85 near term support after the pull back this week. It’s probably also trying to draw support from 55 D EMA (now at 33359.36). Another rally is still in favor through 34712.28 resistance to 61.8% projection of 68220.94 to 34712.28 from 31429.82 at 35169.54. However, firm break of 332.33.85 will argue that the pattern from 34712.28 has started another falling leg back towards 31429.82 support. Now that there is no breakthrough after FOMC, the markets will look into tomorrow’s non-farm payroll for inspirations.
