Fed Chair Powell Just Said Risks to the Economy Have Diminished. Why That's Good News For Investors.

Core Viewpoint - The Federal Open Market Committee (FOMC) decided to maintain the Fed funds rate at 3.5%-3.75%, with minimal market reaction, as the S&P 500 closed nearly flat, down 0.01% [1]. Group 1: Economic Assessment by Jerome Powell - Powell indicated that the risks of inflation and unemployment have diminished, although they still persist [4]. - The Fed Chair noted that the labor market is stabilizing, with the unemployment rate around 4.4% in recent months [4]. - Powell suggested that the impact of tariffs has largely been absorbed, although they continue to keep goods inflation above the Fed's 2% target, while services inflation is decreasing [5]. Group 2: Labor Market Insights - Powell expressed optimism regarding the labor market, attributing weak job growth to immigration restrictions affecting both labor supply and demand [6]. - Consumer spending remains strong according to data, despite reports of weak consumer confidence [6]. Group 3: Implications for Investors - Generally, falling interest rates are favorable for stock market investors as they prefer stocks over bonds and benefit from easier borrowing conditions for companies [7]. - However, recessionary conditions often lead to rate cuts, which can negatively impact stock prices [7].