Fed Destroys Analysts’ Expectation, Hinting a “No Rate Cut”

Global stock market has been pricing in a Federal Reserve rate cut for a few months, but a comment from Fed Chair Jerome Powell on Wednesday stated that that recent low inflationary pressures may only be “transitory, ” which dashed speculation the central bank was entertaining the idea of a rate cut because of steady inflation, even though Fed’s officials had just voted to hold interest rate.

 

Yesterday, Dow Jones fell 162.77 points or 0.61%, S&P 500 slipped 0.75% while Nasdaq plunged 0.57%. The sudden panic from the U.S. caused a volatility in Asia market on the morning session of Thursday, May 2, 2019. As of 9:50 local time in Bangkok, NIKKEI dipped 0.22%, ASX 200 fell 0.62% while SSEC gained 0.52%, HSI rose 0.41% and KOSPI up 0.20%.

On Tuesday, the U.S. President Donald Trump criticized Fed’s policy, saying it was holding back the U.S. economy. He said the Fed should cut by 1 percentage point and restart a program of quantitative easing, a policy tool used during the financial crisis.

Now that the possibility of rate cut has dimmed, how will the market react to this change of pace?