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Policymakers at the Federal Reserve on Wednesday restated their commitment to keeping a lid on long-term interest rates, saying they’ll continue buying $80 billion in long-term Treasurys and $40 billion in mortgage-backed securities each month “until substantial further progress has been made” toward the Fed’s employment and price stability goals.
But the Federal Open Market Committee’s “dot plot” now shows a growing consensus for boosting the short-term federal funds twice by the end of 2023. All but five of the committee’s 18 members anticipate at least one increase.
Last year, the committee brought the federal funds rate the rate banks pay for overnight loans to 0 percent in an attempt to lessen the economic impacts of the pandemic. With increases typically implemented 25 basis points at a time, two rate increases would bring the federal funds rate back to 0.5 percent.
Arguably, you don t need to do a thing, the Mad Money host said after parsing through Powell s comments earlier in the day and the updated projections from the Fed s policymaking arm.
If anything, Cramer said he believes the drop in stocks Wednesday, combined with the new insight into the Fed s thinking, could create opportunities for investors. I think you should simply stay the course, maybe using this decline to buy some high-quality stocks, especially industrials, right into the teeth of a downturn, Cramer said. With the Fed taking itself out of the equation for at least six months, maybe longer, the industrials have a lot more room to run, he said, adding that he also shares that forecast for the technology sector.
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THE BIG DEAL Fed chief brushes off fears of extended inflation: Federal Reserve Chairman Jerome Powell said Wednesday that the U.S. is on track for a strong rebound from the coronavirus pandemic even as the economy hits inflationary speed bumps on the path to full recovery.
Powell spoke to reporters after the Federal Open Market Committee (FOMC) the Fed’s monetary policymaking arm announced that it would hold its baseline interest rate range steady at 0 to 0.25 percent and continue to purchase $120 billion in Treasury and mortgage bonds each month.
During the press conference, Powell brushed off fears that the recent inflation surge would force the Fed to slam on the brakes with an interest rate hike sooner than expected.
Federal Reserve Chairman Jerome Powell on Wednesday used the recent plunge in lumber prices as an example of why the central bank thinks the recent surge in inflation will be transitory.
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