Thursday, March 19, 2015

The Fed Makes the Market Happy

The stock market sure liked what the Federal Reserve had to say yesterday - or rather what the Fed didn't say. With unemployment continuing to fall and GDP growth remaining strong, many economic pundits thought this might be the moment for the Fed to announce it was finally raising interest rates. Instead, it said following its March meeting that an April rate hike "remains unlikely."

In large part, this is because the Fed's view of the economy is not as rosy as you might think. Its current forecast, released yesterday, projects GDP growth to be 2.3 to 2.7 percent for all of 2015, down from its December projection of 2.6 to 3.0 percent. The forecast for 2016 is roughly the same.

Still, the market was more impressed by the unchanged interest rates than it was by the changed growth prediction. The S&P 500 was down by 8 points before the Fed's announcement, but promptly turned that around to a gain of 25 points.

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