Updated 1 month ago
Fed still sees rate cuts in 2024
By Cate Chapman, Editor at LinkedIn NewsUpdated 1 month ago
The Federal Reserve maintained its outlook for three interest-rate cuts this year and, as expected, left its key rate unchanged Wednesday at a 23-year high. Some economists had foreseen fewer cuts for 2024 amid a recent pickup in consumer-price growth. But, in a sign of confidence that inflation will resume its downward path, the Fed also projected slightly stronger growth in the economy and prices. It forecast unemployment of 4% by 2025, slightly below a December forecast of 4.1%.
- The Fed’s preferred inflation gauge declined one tick to an annual rate of 2.8% in February, compared with a target of 2%.
- It has held its key rate at an average 5.3% for five consecutive meetings.
- About 70% of traders expect cuts to begin in June, compared with 60% prior to this week's announcement.
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#TheFed is projecting confidence that it remains on the path to its #inflation target, despite raising its growth forecast and lowering the level of expected unemployment amid hotter-than-expected inflation. In Chairman Jerome Powell’s comments, he admitted that the February numbers were higher than expected but suggested the January data, which also surprised to the upside, might have been attributable to seasonal factors. The committee continues to anticipate three cuts in 2024 despite higher GDP growth, lower expected unemployment and significant easing of financial conditions. Equity markets cheered the Fed announcement. All the major equity indices were up over 1%, with small caps outperforming. The Treasury curve was flat with the dot plot in line with market expectations for cuts. Gold rallied and the dollar fell as the inflation hawks positioned against the Fed.
The Federal Reserve believes inflation is still too high. That’s the reason it's signaling that interest rates should remain higher for longer, but not forever. For the fifth consecutive meeting, the Federal Open Market Committee left the benchmark federal funds rate target between 5.25% and 5.50%. On balance, officials see three rate cuts of ¼ of 1% by the end of the year, with further rate cutting through the end of 2026. As noted by my Bankrate colleague Greg McBride, CFA McBride, “Interest rates took the elevator going up but will take the stairs coming down.” On the positive side, they noted that hiring has remained strong, and the unemployment rate is still low, recently at 3.9%. Taken together, they see the unemployment rate rising no higher than 4.1% over the next couple of years. That assumes there’s no recession and that inflation pressures will continue to ease. What does this mean for consumers, including borrowers and savers? They should continue to pay down, or pay off, the highest cost debt such as on credit cards and personal loans. It also means that mortgage and other key borrowing rates remain elevated. On the truly positive side, the opportunity remains for savers to capture the highest yields, and to lock those in for longer among those with forgiving time horizons, meaning they won’t need the money for a sudden expense in the near term. Here's more on what the Fed said and did at its March meeting from Sarah Foster:
The FOMC’s expectations for headline inflation throughout 2024 didn’t change much over the past three months, despite recent hotter than anticipated price growth readings for January. As such, their projections for interest rates didn’t change much either, and they’re still projecting three quarter-point rate cuts by the end of the year. Economic measurement, including seasonal adjustment, is just one of many things that’s had to adapt over the past handful of years. And it's still adapting. This can translate into higher-than-expected readings that aren’t exactly reflective of what’s happening. And even when a legitimate spike in the data happens, it doesn’t necessarily portend a trend. Today’s projections from the Fed indicate they don’t see that January uptick in price growth as a cause for serious alarm. That said, they’re keeping rates steady for now as they’re not fully convinced inflation would get to 2% without that continued restriction. The increased GDP projections and meager uptick in anticipated unemployment indicate the Committee expects the strong economy to continue. With interest rates high, it’s still a good time to put liquid savings into a high yield savings account or into a CD. Some of the highest CD rates are found in shorter-terms right now, so they remain accessible if you need access to the cash in 6 months or one year’s time. For folks considering a large purchase like a home or car, borrowing costs will remain high for now. Gone are the days of taking low interest rates for granted. Now, you can’t get away without budgeting for the cost of borrowing. For some, this means delaying the big purchase until they can reap an incrementally better rate. For others, the higher rate may be a cost they are willing to accept after reflecting on how necessary or important that purchase is. #Fed #economy #inflation
📈 Insights from the Federal Reserve Meeting: What Lies Ahead for Interest Rates and Economic Growth? The Federal Reserve's recent decision to maintain its key interest rate unchanged has sparked curiosity about the economic landscape ahead. Here are a few insights from the Federal Reserve Meeting that stood out: ➡️ Interest Rate Stability: The Federal Reserve has decided to maintain its key interest rate unchanged, holding steady at a 23-year high. ➡️ Projected Interest Rate Cuts: Expectations for three interest-rate cuts in 2024 have been projected, despite recent consumer-price growth. ➡️ Confidence in Inflation's Trajectory: The Fed remains confident in inflation's downward trajectory, supported by projections of stronger growth in both the economy and prices. ➡️ Optimistic Unemployment Forecast: The forecast for unemployment indicates optimism, with a projected rate of 4% by 2025, slightly below previous estimates. ➡️ Data-Driven Decision-Making: Chair Jerome Powell reiterated the Fed's commitment to data-driven decision-making, emphasizing readiness to adjust policy as needed. ➡️ Market Response: Market's initial response to the announcement was positive, with stocks rallying and Treasury yields mostly lower. ➡️ Long-Term Outlook: Looking ahead, the Fed's "dot plot" indicated three cuts in 2025 and beyond, signaling a cautious approach to long-term economic stability. ➡️ Stay Tuned for More: What factors are shaping the Fed's projections, and how might they influence economic growth and stability in the coming months? I would love to hear your comments below! #Economy #Finance #Business #Leadership
Right after the Fed decision yesterday, and during the press conference from Chair Powell, we asked Bloomberg Professional Services users about the impact of the new interest rates guidance (dot plot) on stocks and bonds. Here's what they told us: 💵 S&P 500 will lose momentum 💵 Treasuries have yet to hit bottom 💵 The yen is expected to lead the charge against the dollar Read more from Garfield Reynolds: https://trib.al/VBk5Cw2
The #FederalReserve left interest rates at the highest level in two decades on Wednesday, as was expected. Policymakers still expect to reduce rates three times this year, but forecast fewer cuts in 2025 given a recent uptick in inflation. Some other highlights: - Median PCE inflation forecast is unchanged at 2.4% for 2024 while core PCE projection rises 0.2 percentage point to 2.6%; economic-growth estimate for 2024 jumps to 2.1% from 1.4% - Officials also lifted forecasts for where they see rates settling over the long term, boosting their median estimate to 2.6% from 2.5% - Fed maintains its pace of quantitative tightening; central bank doesn't give any immediate hint of change to the program, after policymakers were scheduled to hold an in-depth discussion at the meeting - Treasury yield extended a decline and S&P 500 index reversed losses while the dollar fell. Swap traders slightly upped their bets for the probability of the Fed’s first rate cut coming in June Read our full Bloomberg News story here from Steve Matthews: #useconomy #inflation #interestrates #monetarypolicy
"Bullish-dovish?" The Fed's latest outlook showed what one official calls the "golden path" still in play, with stronger growth, low unemployment and still three rate cuts this year and a continued (albeit slower) drop in inflation. The soft landing, IOW, is still alive and well despite stronger than expected inflation to start the year. https://lnkd.in/d537Nc-6
The Federal Reserve signaled Wednesday it would lower interest rates three times this year, consistent with its previous December projection. Fed officials see the fed funds rate peaking at 4.6% in 2024. That suggests the Fed will cut rates by 0.75%. The Fed has moved in 25-basis-point increments over the last year or so, indicating the central bank expects to cut interest rates three times in 2024. Here's what the Fed's critical 'dot plot' told us... Yahoo Finance #federalreserve #fed #powell #interestrates #inflation #business #finance
🚨 Reading Between The Lines: There's What Chair Powell Said And What The SEP Actually Revealed. ➡️ The latest SEP shows the committee expects stronger real GDP (2.1% vs 1.4%) with less disinflation (2.6% vs 2.4% core PCE) when compared to its December forecast. The committee also expects a slightly lower #unemployment rate (4.0% vs 4.1%) in 2024. Perhaps this is a bet on still rising labor supply and labor productivity. ➡️ While the median remains unchanged, a close look at the dot plot suggests that fewer FOMC participants think that more than three rate cuts would be appropriate (1 in March vs 5 in December). ⚡️However, during his press conference, #Fed Chair Powell provided some much needed reassurance that the latest - stronger than expected - inflation data had not changed the committee’s perception about the potential path of #inflation and the appropriate target level for the federal funds rate 👀 The yield on the 10-year Treasury note – which #mortgage rates tend to follow – FELL on the day but based on the Fed's own projections, I wouldn't hold my breath for long dated yields to ease much. https://lnkd.in/gWjfM7Jx
Could the storytelling by the Federal Reserve finally start to see the economy's actual plot than what they felt it would be? For the 5th straight meeting, we are seeing them keep the rates unchanged. The forecast of 3 interest rate cuts still remains for the year, but there’s still a lot of the year left. What was perplexing about the mark about inflation from the meeting was this line,"[inflation] has eased but remains elevated". Could they now be looking more closely at how inflation is still impacting consumers while it apparently “cooled”. The pivot that we could see be more of the Federal Reserve trying to stir off Stagflation within the economy more than anything. The reason I keep bringing this back into the chat is due to the fact we are watching a repeat of an economic episode from the 70s — elevated inflation with a bit of weak economic growth. The Goldilocks of the pace of the economy is telling the current story, with similar characters. The pace of the growth is not enough to match the big bear of inflation. Labor is still weak as layoffs aren’t being spoken about over the hiring that’s happening and the rate of Americans returning to work is scary to think about. Could the Federal Reserve start to finally see that the story they hoped for is not in the current book of consumers trying to handle their books — spending being up due to cost of things being up. The pivot of the pandemic isn’t matching the plot (no pun) of what The Federal Reserve thought it to be but how could they change this story from a nightmare to a fairy tale ending? Inflation could be on the pace to stay high but keeps US debt from rising even more. Yet, how does this help those keeping the economy moving — consumers? For consumers, I’m more focused on the cost of living going up no matter how much the Federal Reserve cools the porridge of the economy. Their porridge might be cool, but the one the consumers are eating is too hot/high. Debt beyond reason, inflation pulling it up — still the story is off from the plot. Intrigued to see what the other chapters hold by the end of the year going into 2025. #inflation #fomc
Key takeaways from the Fed meeting: The March FOMC meeting saw the Fed remain patient, keeping its policy rate unchanged at 5.25-5.5% and maintaining their forecast of 75bps of cuts in 2024. The US economy has continued to expand at a solid pace, and while job gains have moderated, they remain strong. Stickiness in the disinflation process will keep the Fed cautious before starting its easing cycle. The #disinflation process is messy: The February CPI report saw inflation tick up to 3.2%, but the gain was driven primarily by a sharp increase in energy prices while food prices remained flat on the month. Core inflation has risen 3.8% over the past year, which is the slowest pace since May 2021, with core services at 5.2% (the lowest since May 2022) and core good inflation remaining in deflation at -0.3%. Additional strength in February CPI stemmed from likely temporary factors. Similarly, PPI inflation ticked up to 1.6% in February, but more than two thirds of the monthly gain stemmed from a rebound in energy prices that also distorted CPI. The Fed tends to rely more on the PCE index as their favored inflation gauge, and here we expect to see a gradual cooling continue into Q2. The US labour market meanwhile continues to gradually cool as supply and demand come into better balance. Monthly #payrolls have risen at an average rate of 265,000 in the last 3 months, which is the strongest pace since mid-2023 and more than double the replacement rate (~125k) that would lead to an increase in the unemployment rate. Strong labour supply from rising female labor participation and a boom in US immigration contributed to both payroll strength and disinflation in 2023, while also providing some downward pressure on US #wages. However, wage pressures (at 4.3% in the February payrolls report) are still above the 3.5% level consistent with the Fed's 2% inflation target. As such, without continued increases in immigration flows, we think further rebalancing is necessary in the labour market via softer hiring for the FOMC to reach its inflation goals sustainably. Alternative data sources suggest that this rebalancing is in the pipeline. The US quits rate has fallen below its pre-pandemic level, while the level of hires has cooled to 5.6 million per month from a peak of 6.9 million in 2021. Looking ahead, hiring intentions from small businesses have also fallen in recent months toward more normal patterns and layoffs are still below their pre-covid average of 1.8 million per month. The latest economic data and Fed communications reinforces our view of 75 basis points of cuts this year starting in late Q2. We think the current balance of risks tilts toward fewer rate cuts given ongoing strength in the economy, with Q1 GDP growth tracking at about 2% and inflation run rates still in the range of 3-4%. After the surprising strong growth in the second half of 2023, we expect GDP growth to slow to 2.2% this year.
U.S. consumers turned out to be made of sterner stuff than experts had anticipated—much to the delight of economists, politicians and Wall Street alike—but Brian Moynihan is warning the Fed not to push the public too far. Thus far, well-reported “resilient” consumers have managed to keep up their spending despite a combination of inflation and higher base rates, mitigating the much-anticipated slowdown of the economy. But their cash can only go so far, warns Bank of America's CEO, who has alerted Fed chairman Jerome Powell not to “overshoot” on his policies to wrangle inflation back down to its 2% target. Read more: https://lnkd.in/eJpZaFcn
Fed Meeting 3/20 Postscript: We live in an amazing moment, financially speaking. The Fed Funds rate is at 5.5%, the highest its been since 2001. Unemployment is low. GDP is over 2%. The S&P500 index is at all-time highs. Household wealth is growing for those fortunate enough to own their home and have retirement savings tucked into IRAs and 401(k)s. The topline story is, as Ralphie said in "Christmas Story", "When all is most right with the world..." Or is it? If you recall in that movie, that is the moment right before the Bumpass' dogs show up and eat the Christmas turkey. Just saying. What did we learn from yesterday's Fed meeting? Well, first is the headline. The Fed held at 5.5% for now, and officially speaking, their "dot plot" shows a projected 3 rate cuts by end of year. Assuming 25 bps cuts each, we would be at 4.75% in December. This implies the first rate cut will be in June. They also said they expect inflation to continue to decline. I have a few thoughts on this very rosy assessment of things. 1. Inflation is no longer falling. Core PCE (excluding food & energy) seems to be stabilizing in the 2.5%-3% range. Circling the target, but not over it. 2. Concentration Risk in the stock market. I read yesterday that all the gains in the NASDAQ 100 year to date, nearly 10%, are from just 4 stocks (Amazon, Microsoft, Nvidia and Facebook). The remaining 96 stocks in that index are actually at a loss of ~0.5% YTD. Sorry to be a downer but the only other times performance was concentrated in so few stocks was around 2000 (the dot com bubble) and 1929 before the October crash. 3. Fed's reluctance to make a policy shift in an election year. Jim Bianco makes a compelling argument that if the Fed doesn't reduce Fed Funds in June, it would wait until after the November election to cut rates. The reason? They want to remain politically neutral; they don't want to be perceived as trying to influence the election one way or another. They wouldn't cut the rate for the first time - a policy shift - two months before. For those who say, "Well, what about 2008? That was an election year." It was, but the Global Financial Crisis was a seismic event. It demanded action regardless of politics. Plus, Bush was at the end of his 8 years at that point. Different situation. Barring some jolting geopolitical event, I don't see the case for the Fed to cut Fed Funds in June. Inflation has a ways to go. Unless they think that 3% inflation is OK, and within the "range" of 2%, which is an argument you could theoretically make. But how can you cut rates with the stock market at all-time highs and unemployment low? The Fed would be giving away its main weapon for combating a bad economy by cutting the rate. Given recent history, I think it's more likely the Fed waits too long to cut rates, rather than the other way around. December 2024 or even 1Q 2025. What do you think? #fedpolicy #interestrates #riskmanagement
The takeaway from today's #federalreserve decision is that while core inflation has surprised to the upside so far in the first quarter, not much has changed for Chair Powell and many of his colleagues on the FOMC. I think the markets rightly viewed the days events as dovish, hence the rally in stocks and bonds. Looking at the Summary of Economic Projections. The median barely held on at three cuts. Had another person shifted, we would have been at two cuts. Nonetheless, GDP was revised up, core inflation was revised up (higher NGDP) and the median dot was still unchanged. Should inflation surprise to the downside between now and March, we could see the median solidify somewhat. Powell struck a number of important themes at his press conference. First, inflation is about the fundamental path. Thus, he did not get too excited about the downside surprises in H2 2023 and is not too concerned about the upside surprises so far this year. The upside surprise can be seen as a reason not to cut in March, but not a reason to not think about cuts this year. Second, Powell had a chance to push back against the easing of financial conditions we've seen so far this year. He did not take the bait. Talk about revealed preferences. Third, strong growth won't necessarily push the Fed away from cutting rates. This is perhaps a sign that Powell sees a stronger supply-side backdrop. At any rate, tolerating stronger growth is dovish, all else equal. The risk for the Fed is that January and February's inflation data represent a series of higher than expected inflation prints. I get the risk, but ultimately, Powell sees the stance of monetary policy as very restrictive. As a result, he's more on alert for downside surprises to growth than he is upside surprises to inflation.
The Fed keeps rate unchanged, signaling 3 cuts this year 📈 At the same time, the Fed projects faster growth from 2024 to 2026, lower unemployment, slightly slower overall PCE inflation yet higher 2024 core inflation. That means according to the Fed, a soft landing—getting down to 2%—is a bit further away. 📊 But we don't interpret it as bad news. Instead, the new projections for inflation at 2.4% and 2.6% for PCE and core PCE respectively in 2024 are tolerable and sufficient enough to keep the economy running strong. 📈 This fits the narrative that we have been arguing for quite some time that in the next 3 to 5 years, we should see a higher inflation target, especially when inflation ran consistently under 2% pre-pandemic. 💼 Of course, the Fed Chairman won't stray away from his commitment to get inflation down to 2%. But again, he and his fellow members of the FOMC have been signaling that they will move to loosen monetary stance before we get to 2% as long as the inflation trajectory is firmly under control. 🗓️ We are comfortable with our baseline forecast that the first cut will take place in June, followed by 2 more cuts this year.
March FOMC Meeting: Rate Cut Uncertainty (This analysis is based on https://lnkd.in/g2T6jkbp) At this week’s FOMC meeting, the Committee again decided to keep the Fed funds rate target range unchanged. Chair Powell’s remarks today made clear that the FOMC will take its time before cutting its policy rate and the Fed will use the next two to three months to assess how temporary the disinflation seen towards the end of 2023 has been given the recent firming in core inflation as well as continued solid real economic activity expansion. In terms of the data leading up to this meeting: underlying core services inflation firmed recently while near-term “Main Street” inflation expectations shifted down since December. On the other hand, the labor market and consumption spending cooled somewhat but remained relatively strong. Thus, over the next few months the Fed needs to make sense of two diverging trends: a possibly end to disinflation of core services prices versus a potential further cool down of labor market strength. So how tight is the Fed's policy stance now? Survey-based one-year real rates only rose above neutral levels after the May FOMC meeting (first chart 👇). Since then, the expected restrictiveness of the Fed’s policy stance peaked in Q4, as inflation expectations eased, and have been stable around this peak for now in 2024. FOMC members updated their forecasts for inflation, growth the unemployment rate and the Fed funds rate at this meeting. Despite a higher projected core PCE inflation for this year as well as a more benign real activity outlook, the Fed funds projection for 2024 in this updated SEP suggest an unchanged amount of three rate cuts. The number of cuts for 2025, on the other hand, decreased by about one. Compared to December the Fed's own assessment of the neutral real rate barely moved and generally still lag estimates from elsewhere (second chart 👇). Policy stance expectations from “Main Street” and markets for early 2025 are now broadly in line with the Fed’s assessment of its policy stance for 2025 overall (final chart 👇). This likely reflects a slightly stickier inflation outlook going into 2025 on the side of “Main Street” and markets versus the Fed. The high inflation volatility over the past 12 months have made FOMC members much more indecisive about the start and magnitude of policy easing in the near term. And as expected real rates are not rising further and still robust real activity expansion, this means that the Fed can afford to be patient in determining the start date of rate cuts to further assess whether inflation has enough momentum to easing back to 2% over the medium-term. My modal view, therefore, remains a start towards policy rate cuts at the June 2024 FOMC meeting. For more detail see Macro Market Notes: https://lnkd.in/g2T6jkbp #federalreserve #inflation #economy2024
Today, as many expected, the Federal Reserve (Fed) decided to hold interest rates steady. However, the Fed also released its first Summary of Economic Projections (SEP) of the year, which contains the median consensus estimates of the Fed’s own expectations of interest rate movements. The Fed’s expectations for 2024 remained unchanged in this SEP compared to the last one in December, with three cuts still being anticipated by year’s end. What has changed since December are investors’ expectations of rate cuts this year. In December, market rate expectations were quite bullish. Since then there have been several data releases indicating that inflation is continuing to run hotter than many anticipated it would by this time of the year. As a result, market rate expectations for 2024 have moved down meaningfully over the last quarter. The fact is, we're all, Fed included, still prisoners to the next data release. The market ended 2023 optimistically expecting several rate cuts this year. Two days after the Fed’s last SEP release (December 13, 2023), approximately 58 percent of the market expected 6-7 rate cuts in 2024. By year’s end, sentiment had turned even more bullish, with over 70 percent of the market expecting 6-7 rate cuts. As of yesterday, almost none of the market expected 6-7 rate cuts in 2024. In fact, while roughly a third of the market now agrees with the Fed’s current forecast of three rate cuts in 2024, another third is expecting even fewer rate cuts than the Fed. Still, both the Fed and market expect interest rate cuts sometime in 2024, they just disagree about how many.
The March 20 dot plot shows more fed members estimating higher rates for 2024 than their December estimates; with the lowest December estimate falling off the March dot plot. Similar situation in the 2025 dot plot. Of note: The December Fed statement said "The U.S. banking system is sound and resilient." No reference to banks exists in the March statement. This is significant because (1) the Fed's "statements" do not vary much from meeting to meeting and (2) there are significant problems within the banking system, including among CRE loans and bond portfolio values.
The challenge facing the Federal Reserve, and Chairman Powell specifically, in finding the right balance between keeping #inflation at bay and managing #interestrates in a way that doesn't completely stifle business investment or derail consumer spending is no easy task. I do not envy their position. It was not surprising that the FED, as expected, held interest rates steady today. Not with both inflation readings and #jobmarket data providing plenty of justification for this course of action over the past few months. The updated dot plot chart (see below), which illustrates the FED's intent regarding future interest rate policy, was also not surprising to me. The reality of higher interest rates in the years to come is being begrudgingly accepted by the voting FOMC members. A quick summary: ✅ For 2024, the median fed funds target rate is now 4.6% (vs 4.6% on 12/23) ✅ For 2025, the median fed funds target rate is now 3.9% (vs 3.6% on 12/23) ✅ For 2026, the median fed funds target rate is now 3.1% (vs 2.9% on 12/23) Alex's Analysis: For business leaders and decision makers, the key takeaway is that you have to figure out a way to operate, grow, and maintain #profitability for your companies in this environment of higher-for-longer interest rates and prohibitive borrowing costs. Market share gains, productivity improvements, and cost-saving initiatives (except layoffs!) will all be necessary to make this happen, but I know you're up to the challenge. This isn't your first rodeo. Roll up those sleeves and figure out how to get it done. Your people are counting on you, and this is where your leadership shines! Onward and upward!
📈 #Economy News - Fed Policy on #InterestRates 🚀 Today, the Federal Reserve maintained the federal funds rate at a steady 5.25%-5.50%. Amidst this expected decision, the Fed's latest Dotplots have sparked conversations, hinting at a more cautious approach towards rate cuts in 2025 and 2026. As we hang on every word from Fed Chair Powell's press conference, it's clear that the overarching narrative is one of careful optimism. Despite holding rates steady for now, the median FOMC member forecasts suggest a downward trend in interest rates across 2024 to 2026, albeit with a vigilant eye on inflation amidst solid growth. Here's a breakdown of the FOMC Member key forecasts of interest rates. 2024 - Rates expected to remain unchanged, holding at 4.6%. 2025 - A slight uptick in expectations, with rates forecasted at 3.9%, up from December's 3.6%. 2026 - Anticipations adjust to 3.1% from the previous 2.9%. The #finance implications? A likely negative impact on business investment, GDP growth, and job creation. Yet, in the face of these challenges, the Fed's outlook on employment and GDP growth remains robust, with upward revisions for the years ahead. In a world where economic signals are often mixed, today's announcement serves as a beacon for strategic planning. As professionals navigating these waters, let's discuss how these developments might shape our industries, investment strategies, and the broader economic landscape. 🔍 Dive into the details, align your strategies, and let's thrive in this evolving economic era. What's your take on the Fed's cautious optimism? Share your insights below! ⬇️
The #FederalReserve announced it would keep its benchmark #interestrate target high at a range of 5.25% to 5.5%. At the conclusion of its #monetarypolicy meeting on Wednesday, the Fed also maintained its expectation for the equivalent of three 25-basis-point rate cuts in 2024. However, the central bank’s new “dot plots” imply fewer rate cuts in 2025 and 2026 than what it previously forecast after the Fed’s December meeting. Since the beginning of the year, futures traders have been paring back their expectations for Fed rate cuts. And yet stock prices and valuations have been trending higher. The S&P 500 closed at a record high 5,184.57 on Tuesday, and it rose to new intraday highs on Wednesday afternoon. The fact that hawkish developments in the outlook for Fed rate cuts isn’t causing prices to fall suggests the next move on interest rates may not be that big of a deal for the #stockmarket. If the evolving outlook for Fed policy isn’t driving stock prices, then what is? Just take a look at analysts' outlook for earnings... https://lnkd.in/gdxjfU3T
The Federal Reserve on Wednesday held interest rates steady as expected, but signaled that it still plans multiple cuts before the end of the year. Following its two-day policy meeting, the central bank’s rate-setting Federal Open Market Committee said it will keep its benchmark overnight borrowing rate in a range between 5.25%-5.5%, where it has held since July 2023. Along with the decision, Fed officials penciled in three quarter-percentage point cuts by the end of 2024, which would be the first reductions since the early days of the Covid pandemic in March 2020. The current federal funds rate level is the highest in more than 23 years. More here: cnb.cx/49S28lb
🔎 Are you ready for an Escape Room adventure? 🧐 Recently, I experienced my first Escape Room, and if you haven’t tried it yet, I highly recommend it - ESPECIALLY with your family. As we await the outcome of today’s Fed meeting, it’s striking how similar it feels to decoding clues in an Escape Room to ultimately find the way out. However, it's likely that this meeting will only provide fragmented information, leaving us with dots rather than a clear picture of when we might escape this current interest rate landscape. #escape #fed #interestrates #401ksrock https://lnkd.in/gYyzZAbK
The US Federal Reserve (Fed) held rates steady today for the fifth month in a row — no surprise there. The big question was whether the “dot plot,” which charts Fed members’ expectations for interest rates, would still show a median expectation of three rate cuts in 2024. It did, just barely. I share my key takeaways from the dot plot and from Fed Chair Jay Powell’s press conference — in short, the Fed seems to be suggesting that the US economy can have its cake and eat it too.
FOMO vs. FOMC: Can stocks keep climbing as Fed stands still? As widely expected, today’s meeting of the Federal Open Market Committee (FOMC) — the monetary policymaking arm of the Fed — resulted in no changes to the central bank’s federal funds rate, which remains in a target range of 5.25%-5.50%. Moreover, investors hoping to glean new insights into the timing and scope of eventual rate cuts found few clues in the Fed’s quarterly “dot plot” (a projection of where each FOMC member believes interest rates will be in the future) or in Fed Chair Jerome Powell’s post-meeting press conference. #Inflation has remained well above the Fed’s 2% target in an #economy that’s proved surprisingly resilient despite the highest interest rates in more than 15 years. In this environment, FOMC members see little urgency to pivot from holding rates steady to lowering them, as investors keep hoping they will. Instead of fulfilling market wishes for “soon and often” rate cuts, the Fed is still committed to a more measured approach, with three 25-basis-point reductions anticipated by year-end, likely beginning no earlier than June. Fear of missing out on an expected rally once the Fed finally pulls the trigger has kept equity investors in the game, with broad market indexes hovering near all-time highs. But in a presidential election year replete with softening economic growth and geopolitical uncertainty, we believe FOMO-minded investors should stay focused on their long-term goals while considering incremental portfolio allocations to #investments with (1) the potential to benefit from economic resilience, (2) the ability to out-earn cash and (3) attractive relative valuations. I had the opportunity to touch on these topics on this afternoon’s edition of CNBC Closing Bell. Special thanks to host Michael Santoli for inviting me to participate in the discussion on markets and monetary policy. You can find today’s episode here: https://lnkd.in/gGHWjTT5 Does your current portfolio positioning align with your expectations for monetary policy and market performance? #LITrendingTopics
During a busy week of monetary policy adjustments globally, this afternoon the Federal Open Market Committee of the Federal Reserve decided to keep rates steady, maintaining the benchmark policy range within the 5.25% - 5.5% range as broadly expected: markets had sharply pared back rate expectations leading into this week’s FOMC meeting.* Since the committee kept rates steady, attention to was turned to Chair Powell’s remarks and the Summary of Economic Projections. In our new iShares Macro Minute video, we take a deep dive into March’s FOMC meeting and what it could mean for the future of monetary policy. *Source: Bloomberg, World Interest Rate Probability. As of March 20, 2024. Economic projections from: the Federal Reserve, Summary of Economic Projections. As of March 20, 2024. https://lnkd.in/d3vkr2Wm #Fed #FOMC