The Fed took a break from hiking rates for the first time in 15 months. Here's what to know.
Good morning. If you missed yesterday's Federal Reserve decision — and how the market reacted — you've come to the right place.
Let's dive in.
Carolyn Kaster/AP
As far as Fed signaling goes, Wednesday brought a new angle: a hawkish pause.
Two things stood out:
- The Fed did not raise interest rates.
- It raised expectations for how high rates will go.
As things stand, the benchmark rate is in a target range of 5.00%-5.25% — but the Fed's fresh dot plot suggests it'll go meaningfully higher.
"Holding the target range steady at this meeting allows the committee to assess additional information and its implications for monetary policy," central bankers said in a statement.
Consider that right after Silicon Valley Bank collapsed in March, 11 out of 18 voting members expected rates to climb to where they are now and then stop.
As of yesterday, 12 of the 18 policymakers penciled in rates at or above 5.5%-5.75%, meaning they expect to resume rate hikes in the coming months.
The fact the Fed held back on a hike after 10 straight moves higher may tell us that the end is near after all.
Sure, the dot-plot projections point to two more hikes this year, and the market did not like that, but there's a chance that any new economic data could soon convince the "data-dependent" Fed that it's done enough.
The Fed wants to see "credible evidence" that inflation has come down, Jerome Powell said in his press conference.
"We're, I think, stretching out into a more moderate pace" to get a better sense of incoming data, he explained.
Powell also emphasized that there's been no decision made about what's going to happen at the next meeting or any after that, and that they still need to see how much inflation continues to moderate.
As for the market reaction, US stocks were sent on a rollercoaster ride. The Dow Jones ended down 0.68%, while the S&P 500 managed a small gain of 0.08%.
Morgan Stanley's Mike Wilson has said there's more pain ahead for stocks, even with the recent AI boom bolstering indexes.
"Our view," Wilson said, "is that inflation is going to come down, and while that potentially is very good for bonds, it's not going to be good for stocks because that's where the earnings power is coming from — this is really our boom-bust thesis."
Do you think the Fed made the right call in deciding on a "skip"? Email me at madams@insider.com.
Martin Puddy/Getty Images
2. US stock futures edge lower early Thursday after the Federal Reserve paused rate hikes but hinted there were more to come. Here's how indexes look this morning.
3. Earnings on deck: Adobe, Halma, and more, all reporting.
4. A former waitress who lived paycheck to paycheck bought her first home in Detroit for $6,300. She explained how she scaled up to 35 units and achieved financial freedom before turning 30.
5. Even investors in China are bailing on Chinese markets. Expectations for the Fed to keep rates higher for longer have made US bonds and deposits more attractive for global money managers — and that's weighed on non-US assets.
6. Elon Musk's decision to not pay rent on Twitter's offices is adding to commercial-mortgage headaches at Goldman Sachs. The social platform still hasn't made payments on its office space. A lawsuit said that Musk told an advisor he would pay rent "over his dead body."
7. Investors should avoid stocks even as bullish enthusiasm continues to circulate. That's according to JPMorgan's Marko Kolanovic, who is warning that a recession will still be necessary to bring inflation down to the Fed's 2% target. See his forecast here.
8. The housing market is so tight right now because 90% of homeowners are already locked into low mortgage rates. Nearly a quarter of homeowners have a mortgage rate below 3%, which is close to the highest proportion on record. That means snags around tight inventory are unlikely to let up anytime soon.
9. These stocks are best-positioned over the next 10 years to capitalize on the AI boom. Global X's lead AI researcher said the technology is going to transform the economy: "We're very convinced that this is a paradigm shift."
Markets Insider
10. Netflix's password-sharing crackdown could fuel a massive valuation surge. Bank of America forecasted the streaming company's stock could rally another 12% if its strategy proves successful — which implies as much as $20 billion in gains.
Curated by Max Adams in New York. Feedback or tips? Tweet (@maxradams) or email madams@insider.com
Edited by Nathan Rennolds (@ncrennolds) in London.
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