Odds skewed toward another ‘hold’ at next Fed meeting, says Goldman Sachs Asset Management
The recent better-than-feared jobs report supports the Federal Reserve’s decision to hold rates steady — and the central bank will likely continue to stay in a holding pattern at its next meeting, said Ashish Shah, chief investment officer of public investing at Goldman Sachs Asset Management.
“The onus is on the labor market to weaken sufficiently to bring a resumption of its easing cycle,” Shah said. “Any weakening in the labor market, however, could take a number of months to become apparent and we see the odds skewed towards another ‘hold’ at next month’s meeting.”
— Michelle Fox
See what changed in the Fed statement
In this meeting’s Fed statement, the committee notably added that it “judges that the risks of higher unemployment and higher inflation have risen.” Click here for a comparison of the March and May statements.
— Alex Harring
Stocks take a leg lower after Fed commentary calls out rising inflation risk
Stocks turned lower after the Federal Reserve issued its post-decision statement.
“The Committee is attentive to the risks to both sides of its dual mandate and judges that the risks of higher unemployment and higher inflation have risen,” the post-meeting statement reads.
The S&P 500 was down 0.4% on the day, while the Nasdaq Composite fell 0.9%. The Dow Industrials was well off its highs, up just 45 points, or 0.1%.
–Darla Mercado
Federal Reserve holds steady on rates once more, as expected
Central bank policymakers kept a steady hand on interest rates, maintaining them at the target range of 4.25% to 4.5%.
This time, the Federal Open Market Committee noted that it is “attentive to the risks to both sides of its dual mandate and judges that the risks of higher unemployment and higher inflation have risen.”
Click here for more details from CNBC’s Jeff Cox on the Fed’s rate decision.
–Darla Mercado
Where markets stand before the Fed’s announcement
The three major averages were in positive territory – albeit with the Dow Industrials and S&P 500 getting a boost from Disney – just before 1:30 p.m. ET.
The S&P 500 was up 0.46%, while the Dow surged 0.93%. The Nasdaq Composite was just above the flatline.
The U.S. 10-year yield traded at 4.287%, down about 3 basis points, while the rate on the 2-year note inched up by 1 basis point to 3.8%.
–Darla Mercado
Where key consumer rates stand before the Fed’s rate announcement
As the Federal Reserve prepares to announce its policy decision, consumer rates that are closely tied to the 10-year Treasury yield remain high.
The benchmark note yield is trading just below 4.3% as of midday Wednesday, up from the roughly 2% level where it traded during the week of March 11, 2022 – just before the Fed raised rates for the first time in this latest cycle.
Rates on the 30-year fixed-rate mortgage were around 6.9% as of the week of May 2, up from 4.29% in March 2022, according to data from MND. Credit card rates also remain high, hovering at 20.12% as of last week, compared to 16.34% in March 2022, per Bankrate data.
For consumers who are saving, the five-year annual percentage yield was at 1.69% last week, according to data from Haver. That’s up from the 0.5% APY institutions were paying on these CDs in March 2022, but down notably from the 2.87% they offered last September.
–Nick Wells, Darla Mercado
The Federal Reserve will walk a tightrope as May meeting winds down
Central bank policymakers are widely expected to keep interest rates at their current range of 4.25% to 4.5% at the conclusion of their May meeting. Fed funds futures call for a nearly 98% likelihood that the Federal Reserve will stand pat on rate policy.
This meeting is notable because it comes a little more than a month after President Donald Trump rolled out a raft of tariffs, a move that jolted stocks and bonds in April.
Plenty of uncertainty lingers over how these levies will shape up, but Fed Chair Jerome Powell said last month that the duties could put the central bank in a crunch between reining in inflation and lifting economic growth.
Because of this shakiness, traders will be listening closely to Powell’s press conference at 2:30 p.m., seeking clues on what could be next for rates.
Read more here from CNBC’s Jeff Cox on what to expect from the Fed’s rate decision.
–Darla Mercado
