The Fed Announces Willingness to Keep Rates High

The fed announced on Wednesday that they intend to keep interest rates high, most likely around the level as it is currently, for the near future.

Fed chair Powell made some comments to reporters, one of his first appearances since the 2nd inauguration of President Donald Trump. Powell said to reporters, "'I’m not going to have any response or comment whatsoever on what the president said," referring to the president's comments that he intends to reduce rates significantly by himself. Powell is right, the president has no direct authority over interest rates, but he could pressure the Fed to act his way.

Powell also stated that he does not intend to make radical policy changes just because of Trump's ascension into power. He urged the central bank to remain cautious and alert for any future issues which may arise in the economy, like higher inflation from tariffs. This does not include reducing rates, like the president would like him to do.

Many investors were disappointed in Powell's announcement Wednesday. Initially a supporter of cutting rates significantly just last year, the chair of the Fed now wants to make cuts happen slowly, perhaps with a few months in between, or even none at all. This could be both dangerous but necessary, as while high rates could prevent economic output from growing at a faster rate, it could also prevent inflation from spiking, as it has been gradually on the rise since the end of last year.

The market participated in a massive selloff Wednesday as a result. The S&P 500 is down 0.5%, and the Nasdaq is down 0.5%.