In a statement that was released following the conclusion of the Fed's quarterly, two-day meeting, the central bank said it would maintain the target range for the federal funds rate at 2.25 to 2.5 percent.
The Fed's shift Wednesday added up to giving the markets all the candy they wanted, in the estimation of Peter Boockvar, chief investment strategist of Bleakley Advisory Group.
Wednesday the Fed is to leave its Key short-term interest rate alone and to signal that it will remain cautious this year about raising rates further.
It said USA economic activity was rising at a solid rate, as it maintained the target range for federal funds rate at 2.25-2.5 per cent.
Taken together, the extreme hostility of financial markets to even small and gradual interest rises, concerns over the reduction of the Fed's balance sheet, for which there is no historical precedent, and the slowdown in Europe and China, point to the fact that more than a decade after the financial crisis, any "normalization" of the global economy is further away than ever.
Those words will likely be welcome by President Trump, who had repeatedly blasted the Fed - and Powell by name - as it raised rates four times past year.
Market professionals have spotted an explanatory vacuum, and they're rushing to fill it.
"Overall this signals the Fed will not be on autopilot going forward", said Justin Lederer, Treasury analyst at Cantor Fitzgerald in NY. Societe Generale SA's Omair Sharif described this week's statement as "a letter of apology" to the markets. He has said the increases are hurting the stock market, which declined significantly at the end of 2018.
Markets have priced in all that aggressively, and now the Fed has too. Cornerstone Macro LLC partner Roberto Perli said he's heard clients espousing that view, though he doesn't buy it.
Policy makers have made clear they plan to take a wait-and-see approach to watch as the United States economy evolves against such a significant number of challenges, even changing their policy statement this month to reflect those concerns.
This is perhaps the most intriguing conjecture.
Powell previously indicated a shift in the Fed's stance in an appearance January 4, and the results have been evident.
The rally in rates futures came a day after the Fed said it would be "patient" before raising rates further.
The benchmark 10-year U.S. Treasury yield extended its decline to as far as 2.674 percent, its lowest since January 14.
There's just one problem. "That's it", said Powell.
The blue-chip index ultimately closed up 434.90 points, or 1.8 percent, at 25,014.86.
As result of the Fed's reversal, stocks extended their rally after the FOMC's statement and Fed Chairman Jerome Powell's press conference Wednesday afternoon, with the major USA averages ending up 1.8%-2.2%.
What's changed since the Fed's December meeting?
The prospects for a more dovish Fed was music to the ears of market participants as it signaled a risk-on environment.
This is the sobriquet Bank of England Governor Mark Carney earned in 2014 for giving what were seen as conflicting signals on monetary policy.
Lee Hardman, strategist at MUFG, said the euro was sold off on the back of Weidmann's comments, which became more significant given he is one of the more hawkish members of the European Central Bank board.
Shepherdson, who described the Fed as "excessively" dovish, said the degree of steepening of the two- versus 30-year yield curve "suggests that not all bond investors are thrilled with the speed at which the Fed has backed away from its previous position".
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