CNBC Daily Open: The Fed paused, but so did markets

The Fed leaving interest rates unchanged is not a good thing.

CNBC Daily Open: The Fed paused, but so did markets

What you should know today

As expected, the Federal Reserve kept interest rates at their current level. The updated dot plot or Fed members' projected rates for the future, however, suggests two more hikes. Rates will reach 5.6% at the end of the year.

The S&P 500 ended nearly flat. Meanwhile, the Dow Jones Industrial Average dropped 0.68% while the Nasdaq Composite grew 0.4%. Wednesday, European markets were higher. The FTSE 100 gained 0.1%, as the gross domestic product (GDP) in the U.K. increased by 0.2% in April. This reversed a 0.3% decline in March.

Recep Tayyip Erdoan, the Turkish president, said that he would accept the recommendations of his newly appointed Finance Minister on interest rate policy. This could lead to a rise in interest rates to combat Turkey’s high inflation rate of 39.6%, as recorded in May. Erdogan believes that high interest rates are the cause of inflation.

Jean-Noel Barrot told CNBC that France wants Elon Musk to construct a Tesla Gigafactory. Barrot called Musk a "great innovator" -- although he probably does not consider Twitter to be one of Musk’s successes. Barrot had threatened to ban Twitter from the EU last month.

DoubleLine Capital CEO Jeffrey Gundlach said that the Fed will "break something" if they continue to raise rates in this year. Gundlach said that the U.S. is already fragile, and it would be better to slow down rate increases.

Bottom line

The Fed's decision to keep interest rates the same is not a positive.

As many analysts have pointed out, it's a hawkish pause. This means that the Fed could still decide to hike rates later in the year as planned by the central bank. If you want to use a different animal metaphor, the Fed could be compared to a tiger that is stalking its prey. It freezes and pauses before pouncing on it.

Metaphorically, the metaphor is useful in many ways. Investors and economists warn that the Fed's tightening campaign could be too aggressive and kill an economy already in decline. Gundlach stated that "there are many indicators which are in deep recessionary territory." Wharton Professor Jeremy Siegel is "worried" about whether the Fed will stop soon enough.

As if aware of these concerns, Fed Chair Jerome Powell did calm nerves during his press conference. He said that "the conditions we need to have in place to bring inflation down are now being met." Powell said that if inflation falls further, the Fed may deviate its projections to keep rates stable. Powell said that the Federal Open Market Committee meeting in July "will be live," as "no decision has been made."

If investors feel like prey, the Fed may decide to withdraw. The markets may still live.