FOMC Keeps Fed Funds Rate Unchanged Amid Solid Economic Activity

The Federal Open Market kept the target range for the federal funds rate unchanged at 3.5% to 3.75% at the end of a two-day meeting Wednesday, just as Wall Street expected.

The decision was favored by 10 of the 12 of the FOMC members, including Chairman Jerome Powell. As expected, President Donald Trump's appointee Stephen I. Miran and Christopher Waller dissented, arguing that they preferred to lower the target range by a quarter percentage point at the meeting. Waller is among the candidates for Powell's seat when his term ends in May.

Policy makers cited the solid expansion in the economy, and signs of stabilization in the job market at a time when inflation remains "somewhat elevated." The statement also removed the reference to rising downside risks to employment, even as the policymakers acknowledged that job gains have remained low.

"If you look at the incoming data since the last meeting, clear outlook for growth, the Beige Book, everything comes in suggesting that this year starts off on a solid footing for growth," Powell said in a press conference after the FOMC meeting. "Inflation performed about as expected, and as I mentioned, some of the labor market data came in suggesting evidence of stabilization."

(To see the market reaction in the options market, click here.)

The $U.S. 2-Year Treasury Notes Yield (US2Y.BD)$ edged up 1.2 basis point to 3.594%, while the $S&P 500 Index (.SPX.US)$ struggled to climb back above 7,000. The tech heavy $Nasdaq Composite Index (.IXIC.US)$ held on to its 0.2% gain.

While he acknowledged that the tension between employment and inflation remains, he stressed that "upside risks to inflation and the downside risks are probably both diminished a bit."

(ICYMI, read Micron's 51% Rally This Month Spurs Demand for Put Options: Options Chatter)

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