Nasdaq slides, Nvidia drags tech lower as Fed leaves rates unchanged

The most important initial development out of the Fed’s policy statement on Wednesday centered on a shift within the wording of the ultimate sentence in the primary paragraph of the Fed’s statement.

If that looks like a advantageous slice, it’s.

On Wednesday, the Fed said regarding inflation: “Inflation stays somewhat elevated.”

In December, the central bank had said: “Inflation has made progress toward the Committee’s 2 percent objective but stays somewhat elevated.”

The removal of the phrase “made progress” was not received well by markets, with stocks moving to session lows shortly after the discharge of the statement.

The read here suggesting that this language change signaled a insecurity from the Fed that inflation will proceed moving lower.

About 45 minutes later, Powell pushed back on that notion, referring to the change as “language cleanup” reasonably than desiring to send a signal.

In response, stocks bounced off their lows.

Even before this query and answer, Wall Street economists were arguing along the lines of what Powell was laying out.

“Markets have overreacted to the small statement tweaks,” wrote Samuel Tombs, chief US economist at Pantheon Macroeconomics, in an email.

“Inflation is now simply described as remaining ‘somewhat elevated,’ where previously it was deemed to have ‘made progress towards the Committee’s 2 percent objective,’ but we doubt that reflects disappointment on the Committee about recent data. The December CPI and PPI data imply that the Q4 average of core PCE inflation will match the FOMC’s December forecast, 2.8%.”

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