Interest rates hold steady
As expected, the Federal Reserve left interest rates unchanged yesterday leaving the target for short-term rates at just 0.4%. The March statement did make the case for a prolonged period of economic stimulus by the Federal Reserve, noting that “global economic and financial developments continue to pose risks.” Amidst turmoil in overseas financial markets, this marks the third time this year the Federal Reserve has not moved forward with increasing short-term interest rates after hiking in December.
Interest rates were sharply lower after the rate decision, with the yield on the benchmark 10-year note down to 1.86%. Interest rates had a rough time last week after a slew of positive earnings announcements from banks had investors clamoring for riskier investments like equities. The rate decision today has provided some support for so-called “safe haven” investments like mortgages and government bonds, sending interest rates lower after reaching 30-day highs yesterday.
The Fed rate decision headlines a week of economic data that has, so far, failed to cause a major reaction in the markets. New home sales and S&P/Case-Shiller home prices were in-line with economists’ estimates this week. New home sales were up 511,000 versus an expected increase of 520,000. Home prices averaged $182,790 in S&P/Case-Shiller’s 20-City Index, which was very close to the market’s expectation of $182,830.
For the rest of the week, it will be interesting to see if any of the Fed officials have anything to say about future rate hikes. Last month, several officials made hawkish statements after rate decisions caused interests rates to rise, but Fed Chairwoman Janet Yellen calmed the market’s fears about increasing rates in spite of the economic turmoil in China and the oil market.
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