“Patience” was the operative word today, as Federal Reserve Chair Jerome "Jay" Powell indicated the central bank would hold interest rates steady and slow the pace of its balance sheet runoff. In a press conference following the two-day Federal Open Market Committee (FOMC) meeting this week, Powell announced the Federal Reserve Board had unanimously decided to keep interest rates at 2.25% to 2.5%, in line with investor projections.

“As widely expected, the Federal Reserve kept rates on hold and extended the dovish outlook that the central bank has perpetuated since the beginning of the year,” said James Chen, Investopedia’s director of trading and investing content.

The Fed indicated it was unlikely to hike interest rates at all in 2019.

“It may be some time before the outlook for jobs and inflation calls clearly for a change in policy,”

said Powell at Wednesday’s announcement.

He also indicated the bank would taper its balance sheet runoff beginning in May. It currently redeems $30 billion in Treasuries, which will fall to $15 billion before stopping completely in September. The Fed will also roll its mortgage-backed securities, purchased after the 2008 financial crisis, into Treasuries at a rate capped at $20 billion each month.

Leading up to the announcement, the CBOE’s FedWatch placed the probability of rates staying course at nearly 99%. Investopedia’s Anxiety Index, a measure of investor sentiment based on reader behavior, signaled that investors were not anxious heading into the announcement.

Investors and consumers alike have good reason to keep a close eye on the Fed's decision. Since the federal funds rate determines the interest rate banks charge one another, it serves as a benchmark for many consumer interest rates, including mortgages, credit cards and car loans. Should the Federal Reserve choose to raise rates, it could kick off price hikes felt by millions of Americans.

Jeffrey Cleveland, chief economist at Payden & Rygel, however, finds investors may be over-focused on the Fed’s balance sheet. In an emailed statement, Cleveland said, “Frankly, I don’t think the Fed’s balance sheet matters all that much for the economy or markets—but many investors obsess over the topic.”

Markets Hold Steady

Markets reacted favorably to Powell’s announcement, with ten-year Treasury yields falling to a 14-month low. “A very dovish Fed is already ‘priced in’” to the bond market, said Cleveland.

U.S equities surged, breaking out of an early-session rut driven by a statement from President Trump that seemed to indicate a U.S.-China trade deal may be further away than hoped. Technology stocks led the rally, with energy also posting gains.

As the market’s reaction to Trump’s social media indicates, risks may be lurking below the surface. According to John Jagerson, Investopedia’s forex and investing expert, “Continued dovishness seen in the Fed's ‘dot plot’ interest rate projections should continue to serve as a tailwind for equities.”

Powell has previously committed to basing Fed decisions on macroeconomic data, which has recently been noisy. While January saw strong gains in jobs in the U.S. workforce, February was disappointing, with only 20,000 jobs added. According to Caleb Silver, Investopedia’s editor in chief, “We saw the first signs of a hiring slowdown in February and we will be looking to see if that was an aberration or the beginning of an unwelcome trend.” Unemployment currently sits at 3.9%, while inflation sits near the Fed’s 2% target.

Jason Ware, head of institutional trading at 280 CapMarkets, echoed Silver’s sentiment.

“I think the biggest influence on today’s decision is uncertainty,”

said Ware, citing geopolitical concerns including a possible trade war with China, as well as uncertain macroeconomic data such as the U.S.’ weak job numbers in February. “Wage growth is the recent uptick,” Ware added. “At this point we think they need more time to asses these variables in order to pick the proper path.”

While the U.S. economy is healthy by many measures, investors and consumers are more wary than they've been in years. The risk of a slowdown is real, says Silver, “at $870 billion at the end of 2018, (credit card debt) is at a record high, and while delinquencies are still relatively low, a slowing economy could translate into less wage increases, less hiring and mounting debt.”