President Trump Right In Saying The Fed Has "No Guts"

Equity markets usually respond to interest rate cuts with solid gains, but that wasn’t the case Wednesday when the Federal Reserve cut interest rates by 25 basis points, but U.S. equity indices were flat to lower rather than rallying because the language used in the monetary policy statement made it unclear whether markets could expect another rate cut this year, or even in 2020.

Major U.S. indices finished mixed, with the Nasdaq leading losses as it fell 0.11%. The broad-based S&P 500 inched up 0.03% and the Dow Industrials finished 0.13% higher.

After cutting the benchmark interest rate by 25 basis points to a range of 1.75% to 2.00% the Fed statement included the following in regards to this rate cut: “sustained expansion of economic activity, strong labor market conditions, and inflation near the Committee’s symmetric 2% objective are the most likely outcomes.”

The language used has investors worried this will be the final rate cut of 2019 even though CME FedWatch futures have the probability of a rate cut later this year at 62.7%.

The decision to cut rates by 25 basis points was not unanimous, with the St. Louis Fed President James Bullard favoring a 50 basis point rate cut, while Boston Fed President Eric Rosengren and Kansas City Fed President Ester George voted to keep rates unchanged.

Falling expectations for future rate cuts also caused the U.S. dollar to firm against rivals, and U.S. President Donald Trump, who’s been calling for interest rates to go to 0%, said of the rate cut the Fed has “No ‘guts,’ no sense, no vision!”