Financial market 'pause party' makes Fed rate cut less likely

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WASHINGTON/NEW YORK (Reuters) – Risk-taking has been the rage since the Federal Reserve quit hiking interest rates at the end of last year. U.S. stocks are back near record highs and investors are stockpiling the lowest-grade corporate bonds with only a smidgen of extra compensation for the added risk.

Traders work on the floor at the New York Stock Exchange (NYSE) in New York, U.S., April 18, 2019. REUTERS/Brendan McDermid

That rebounding mood on Wall Street may be welcomed by a president that has been demanding the Fed cut rates after markets fell sharply last year, and complaining that even pausing at the current level is the wrong call.

But if anything the ‘pause party’ on Wall Street makes it even less likely that the U.S. central bank will cut rates. Recent positive news on retail sales and exports, which have eased concerns of a sharply slowing economy, makes the case for a rate cut even weaker.

Investors at least have gotten the message, and shifted from projecting a rate cut later this year to now putting the odds at only 50-50 that the Fed will move lower by early 2020.

Wall Street celebrates the Fed’s ‘pause here.jpg

The state of