Hello traders everywhere. As expected the Fed cuts rates by 25 basis points to a range of 1.75 - 2.00%. This cut is the second cut that Fed has implemented in 10 years, the first rate cut came back in July when the Fed cut the rate by 25 basis points to a range of 2.0% - 2.25%.
The market was clearly disappointed by the 25 point cut as it was expecting or hoping for a 50 point cut. The S&P 500, DOW and NASDAQ have all headed lower on the day with the NASDAQ leading the way losing -1.0%.
Though the U.S. economy continues growing at a "moderate" rate and the labor market "remains strong," the Fed said in its policy statement that it was cutting rates "in light of the implications of global developments for the economic outlook as well as muted inflation pressures."
With continued growth and strong hiring "the most likely outcomes," the Fed nevertheless cited "uncertainties" about the outlook and pledged to "act as appropriate" to sustain the expansion.
New projections showed policymakers at the median expected rates to stay within the new range through 2020. However, in a sign of ongoing divisions within the Fed, seven of 17 policymakers projected one more quarter-point rate cut in 2019.
Five others, in contrast, see rates as needing to rise by the end of the year.
The divisions were reflected in dissents that came from both hawks and doves.
St. Louis President James Bullard wanted a half-point cut while Boston Fed President Eric Rosengren and Kansas City Fed President Esther George did not want a rate cut at all.
There was little change in policymakers' projections for the economy, with growth seen at a slightly higher 2.2% this year and the unemployment rate to be 3.7% through 2020. Inflation is projected to be 1.5% for the year, below the Fed's 2% target, before rising to 1.9% next year.
Key Levels To Watch Next Week:
- S&P 500 (CME:SP500): 2,853.05
- Dow (INDEX:DJI): 25,637.43
- NASDAQ (NASDAQ:COMP): 7,766.67
- U.S. Dollar (ICE:DX): 97.47
- Gold (NYMEX:GC.Q19): 1,504.30
- Crude Oil (NYMEX:CL.N19): 62.28
- Bitcoin (BITCOIN:BITSTAMPUSD): 10,949.00