April 2020 Fed Meeting Instant Analysis
Matt Weller, CFA, CMT April 29, 2020 7:22 PM
Near-zero interest rates and asset purchases are here to stay for the foreseeable future, based on the Fed's most recent statement...
With traders keyed in on arguably the biggest week for earnings reports ever, not to mention daily 20%-30% moves in oil, today’s Federal Reserve meeting may have snuck up on some readers. Of course, the central bank has hardly had the luxury of waiting for its scheduled meetings to introduce new measures to limit the impact of the unprecedented economic disruption from the spread of COVID-19 over the past few weeks anyway!
In any event, the Fed remains the world’s most important central bank, and arguably the most important policymaking body when it comes to financial markets, so traders still tuned in for the latest economic assessment from Jerome Powell and Company.
As it turns out, the central bank mostly “stuck to the script” in its decision, leaving the Fed funds rate unchanged in the 0.00-0.25% range and the interest on excess reserves (IOER) at 0.10%. At the same time, the Fed also vowed to continue buying Treasuries, agency debt, and commercial mortgage-backed securities, as well as conducting large-scale repos, as much as needed. Finally, in a nod to the ongoing COVID-19 pandemic, the statement noted, “The ongoing public health crisis will weigh heavily on economic activity, employment, and inflation in the near term, and poses considerable risks to the economic outlook over the medium term...”
Finally, and perhaps most importantly, “the Committee expects to maintain this target range until it is confident that the economy has weathered recent events and is on track to achieve its maximum employment and price stability goals.” In other words, near-zero interest rates and asset purchases are here to stay for the foreseeable future.
Financial markets took the Fed’s statement mostly in stride, with only small adjustments in major assets: US stock indices ticked lower (though remain well higher on the day), 10-year treasury yields ticked up 2bps to 0.63%, oil and gold both edged lower, and the US dollar dropped about 20 pips against most of its major rivals:
Source: TradingView, GAIN Capital
Now traders will tune in for Fed Chairman Powell’s press conference for any hints on future policy tweaks and more details on the central bank’s outlook for the economy.
Disclaimer: The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.
Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex and commodity futures, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to Forex.com or GAIN Capital refer to GAIN Capital Holdings Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.