The U.S. Federal Reserve meeting concluded today with a statement release at 2 p.m.
In its first monetary policy decision of 2016, the U.S. central bank left interest rates unchanged at 0.25% to 0.50%. That decision was widely expected from analysts and investors.
Key highlights in the Federal Reserve meeting statement included:
- Labor market conditions continued to improve even as economic growth slowed late last year.
- Household spending and business investments have been increasing at a moderate rate in recent months.
- Exports have been soft and inventory investments have slowed.
- Inflation continues to run below the committee's 2% longer-run objective. That partly reflects declines in energy prices and non-energy imports.
- Policymakers said they are closely monitoring global economic and financial developments. They will continue to assess their impacts on jobs and inflation.
- The Fed's monetary policy stance remains accommodative. The committee expects the economy will grow in a manner that allows gradual increases to interest rates.
- As always, the committee said future Fed moves remain data dependent.
In short, the Fed remains cautious yet not exactly dovish. Some investors hoped the Federal Reserve meeting would end with the committee announcing no more rate hikes would be coming in 2016.
The central bank was not expected to raise interest rates at the Federal Reserve meeting, but markets were anxious about committee members' tone. Those hoping for an absolute dovish commentary were disappointed. Minutes after the statement, the Dow dipped 108 points, or 0.66%. The S&P 500 and the Nasdaq slipped 0.2% and 1.19%, respectively.
The Fed raised benchmark interest rates in December for the first time in nearly a decade after easy monetary policy enhanced asset prices for several years. But stocks have fallen sharply this year amid concerns around China, a slowing global economy, oil prices, and the pace of the Fed's tightening.
When it raised rates for the first time in nine years in December, Fed officials' forecasts signaled four additional hikes in 2016.
But the Fed has not presented a clear picture of when those increases will happen, and that uncertainty is troubling to many investors.
That means investors can expect more market volatility in 2016. Here's Money Morning Chief Investment Strategist Keith Fitz-Gerald's advice to worried investors. He's a seasoned market analyst with more than 30 years of global experience in the markets…
How to Invest Following Today's Federal Reserve Meeting
"I know the markets are tough right now," Fitz-Gerald said. "I get that – there are millions of investors who are rightfully concerned about their portfolios, their investments, and frankly, their financial future."
Fitz-Gerald continues, "Don't lose sight of the bigger picture here, though, and, if at all possible, stay in the game. In the low-rate regime the Fed continues to inflict on us, the markets remain the single most powerful wealth-creation tool at your disposal. And that means you can't ignore them in any mission to protect and grow your retirement."
Fitz-Gerald reminds investors there's always opportunity in chaos, and current market conditions are no exception.
- The Wall Street Journal: Global Stocks Lower Ahead of U.S. Interest Rate Decision
- Reuters: Global Stocks, Dollar Struggle Ahead of Fed as Oil Falters
- CNBC: Futures Lower as Oil, Boeing Weigh Ahead of Fed Statement