Reaction Roundup: Experts weigh in on the Fed, chair Powell

Investing.com -- The Federal Reserve on Wednesday held its key policy rate steady as widely expected. Chair Jerome Powell hinted that the central bank was ready to remain on hold after having cut rates by a total of 75 basis points at the end of last year.

Moreover, Powell declined to comment on the Trump administration’s investigation into the central bank’s renovation of an office building. The Fed chief referred reporters to his extraordinary statement from earlier this month in which he claimed that the investigation was a punishment for not setting interest rates as per President Donald Trump’s preferences.

With the Federal Open Market Committee’s (FOMC) rate decision already priced in, Wall Street had a largely flat reaction after it became clear that Powell would not address the investigation or talk about the central bank’s independence.

The benchmark S&P 500 index ended virtually unchanged on Wednesday, along with the blue-chip Dow Jones Industrial Average. The tech-heavy NASDAQ Composite eked out slight gains.

See below for various reactions to the Fed and Powell from analysts and experts:

Gabriel Shahin, founder and principal at Falcon Wealth:

"The Fed pretty much did what everyone expected, and honestly, that’s a good thing. When Powell doesn’t surprise the market, it takes some of the anxiety off the table, even if rates are staying higher for longer. The key takeaway is that the Fed is still watching the data, not the headlines, and that means we should expect some bumps along the way.

For investors, this isn’t a moment to overreact. Trying to time the Fed rarely ends well. The focus should be on having a portfolio that can handle higher rates and staying disciplined instead of getting caught up in every press conference soundbite."

Richard de Chazal, analyst at William Blair:

“This meeting contained no real surprises following the December meeting, when the Fed lowered rates despite clearly (for the Fed at least) stating at the October meeting that was highly unlikely. The only avenue for potential surprise today was around the voting, with regard to the number of dissenting voters and who those dissenters were.

It was unsurprising to see Fed Governor Miran voting for a further cut at this meeting, just as he has done since he took up his post in September. Though it was a slight surprise to see Fed Governor Waller voting in favor of a further rate cut, and it has raised speculation that this might be to further enhance his chances for the position of Fed chair.”

Matthew Luzzetti, chief U.S. economist at Deutsche Bank:

“The statement and press conference signaled that the Committee feels better about the economic outlook than they did in December. Powell noted the growth outlook ’clearly improved’ since the last meeting. By extension, the need for near-term rate cuts has lessened. We, therefore, see today’s meeting as reinforcing our expectation that the Powell-led Fed delivered its last rate cut in December.

More broadly, risks around our expectation of one rate cut this year in September have become more balanced. Although weaker labor market outcomes could trigger earlier rate cuts than anticipated, incoming information supports our view that policy is near neutral and, thus, may not need to be eased further.”

Diane Swonk, chief economist at KPMG:

“Powell is loyal to the institution of the Fed and would stay on if he felt the independence of the Fed was at significant risk from political interference. He has cultivated support on both sides of the aisle in Congress, which appears to have stopped the confirmation of overtly political nominees. Powell was questioned directly about tensions with the White House. He flatly refused to engage.

The Fed is poised to be on hold for additional rate cuts at least until mid-year. A June cut is less than a coin toss. A new Fed Chair may want to hold off on rate cuts for at least one meeting to reassure financial markets. The Supreme Court may have the final say; trust is gained in teaspoons and lost in buckets.”

Justin Wolfers, professor of economics at the University of Michigan:

“Powell ducked politics in today’s presser, including questions about himself. He was exactly who he’s meant to be: direct, clear, apolitical, and focused on the economy. His bet: the best reply to critics is to keep doing the job Congress gave him.”

Samuel Tombs, chief U.S. economist at Pantheon Macroeconomics:

“Looks like a premature and complacent shift in labor market rhetoric from the FOMC today. The three-month average of private payroll growth is much weaker now (29K) than at December’s meeting (57K).”

Renaissance Macro Research:

“At this point, the way to think about the Fed is that if they are easing before June something bad has happened in the economy. There wasn’t much priced into the market before then to begin with.”

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