Fed holds rates steady, European stock markets rebound

The Federal Reserve left interest rates unchanged in the range between 3.75% and 4%. The decision was not unanimous: the vote within the committee closed 10 to 2, a figure signalling internal divisions over the course to follow in the coming months.

The decision to keep the cost of money steady was explained by Fed Chair Kevin Warsh, who described a solid economy and a balanced labour market, pointing to inflation as the main risk to monitor. This reading places the US central bank in a position of waiting, rather than immediate action, at a time when macroeconomic data do not appear to call for either new rate hikes or cuts.

The reaction of European markets came in the November 2 session, with stock markets across the Old Continent closing higher. Milan led the recovery with a gain of 0.9%, supported by renewed interest in technology stocks and by a drop in oil and gas prices that eased pressure on the energy costs of listed companies.

On the bond market front, the spread between BTp and the German Bund fell to 113 basis points, down from the 118 points recorded on Friday. The yield on the ten-year BTp stood at 4.42%. This movement reflects a climate of reduced tension on Italian government bonds precisely as international markets’ attention shifts to the midterm elections in the United States.

The picture emerging from the day is one of a prolonged pause in US monetary policy, accompanied by a selective recovery in European stock markets. The internal division within the Fed committee, made public by the 10-to-2 vote, leaves open the possibility of new tensions at upcoming meetings, while on the European side the decline in the Italian spread confirms, for now, the resilience of national government bonds in a still uncertain international context.