Wall Street was volatile throughout the day with attention focused on the Federal Reserve's interest rate decision (Image: REUTERS/Lucas Jackson/File Photo)
Wall Street experienced a rollercoaster ride this Wednesday (18), with the Federal Reserve's monetary policy decision in the spotlight.
The US Federal Reserve cut interest rates by 50 basis points, bringing the rate to a range of 4.75% to 5.00% per year.
Check out the closing of the New York indexes:
- S&P 500: -0.29%, at 5,618.26 points;
- Dow Jones: -0.25%, at 41,503.10 points;
- Nasdaq: -0.31%, at 17,573.30 points.
The New York stock exchanges rose almost 1% shortly after the Federal Reserve's decision. However, investors' sentiment cooled after statements by the chairman of the US central bank, Jerome Powell.
Furthermore, the magnitude of the interest rate cut brought back to the table uncertainties about the weakening of the world's largest economy.
Wall Street: Monetary easing begins
The decision on monetary policy in the world's largest economy focused investors' attention this Wednesday (18).
The Federal Reserve (Fed) cut interest rates by 50 basis points, to 4.75% to 5.00%. The magnitude of the reduction was in line with market expectations, according to CME Group's FedWatch tool.
Furthermore, this was the first reduction since March 2020 and marks the beginning of the monetary easing cycle in the United States.
“The[Federal Open Market Committee]has gained increased confidence that inflation is moving sustainably toward 2 percent and judges that the risks to achieving its employment and inflation goals are roughly balanced,” the Fed said in a statement.
Along with the decision announcement, the US Federal Reserve released the dot plot (“dot plot“), updated quarterly. In it, nine directors see the interest rate at 4.40% by the end of 2024 – which opens a window for two cuts of 0.25 basis points at the next FOMC meetings.
In other words, the Fed should bring the interest rate (Fed Funds) to the range of 4.25% to 4.50% by the end of the year, more than they predicted in June, as inflation approaches the 2% target and unemployment rises.
During the press conference, the president of the US Central Bank, Jerome Powell, said that the projections for the trajectory of the cut in the basic interest rate do not imply an urgent process.
“There is nothing in the (Summary of Economic Projections) to suggest that the (Federal Open Market) Committee is in a rush to do this,” Powell said.
He added that it is not yet time to say that price pressures have definitively eased.
“We’re not saying mission accomplished or anything like that” when it comes to getting inflation back to 2%. “But I will say we’re encouraged by the progress we’ve made.”