U.S. stocks ended Wednesday flat to higher, after the Federal Reserve announced it would cut its benchmark federal funds rate a quarter percentage point, in line with market expectations, but included language in its accompanying statement and economic projections that called into question whether there will be another rate cut this year or next.
What drove the market? The Fed announced it would cut the benchmark federal funds rate a quarter percentage point to a range of 1.75% to 2% Wednesday afternoon, but said in an accompanying statement that “sustained expansion of economic activity, strong labor market conditions, and inflation near the Committee’s symmetric 2% objective are the most likely outcomes.”
“The statement was largely unchanged from July and, along with the new economic projections that were also almost completely unchanged – it suggests most Fed officials still see a rebound in economic growth as their base case scenario, which means any further rate cuts would be limited,” wrote Paul Ashworth, chief U.S. economist at Capital Economics, in a note.
“Markets were already pricing in a 25 basis-point cut, and what they wanted to learn was whether there would be more cuts in the future,” Shawn Cruz, manager of trader strategy at T.D. Ameritrade told MarketWatch. “The details we got out of the meeting and the tone of the press conference told us it’s not a sure thing that we’ll see a continuation of stimulus.”
On Wednesday, Saudi Arabia’s Defense Ministry exhibited debris from the recent attack on its facilities, saying they are evidence that Iran was “unquestionably” behind the strike, adding the attack did not originate from Yemen to the south but from the north and Iran. President Trump has said he does not want war with Iran though U.S. Secretary of State Pompeo is heading to Saudi Arabia and Trump on Wednesday called for more sanctions on Iran.
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