SP500 rallies while Fed cuts

  • Fed cuts by 25bp
  • SP500 hits another all time high and falls post conference
  • ‘Uncertainties about this outlook remain’ with regards to economic expansion

The FOMC met today to discuss monetary policy going forward.

The committee revised the target rate down from 175-200bp to 150-175bp citing ‘uncertainties’ about sustained economic expansion, inflation and labour market conditions showing strength.

Speaking in the post decision press conference, Chairman Jerome Powell said, ‘If something causes us to materially reassess that outlook, that is what will cause us to change our view.’

The Fed are taking a data dependent policy stance amid recent rate market stress and the extension of the repo window from overnight to 14-days which has increased the Fed’s balance sheet.

The market could view this as there being a restart of large scale asset purchases since overnight, the likelihood of a 25bp cut at the December meeting has increased from 18.7% to 22.9%.

The SP500 rallied to another all time high through the press conference, however fell off after which was most likely die to the pricing in of the cut.

You can read the official statement here.