watch
now
The
Federal
Reserve
on
Wednesday
held
interest
rates
steady
as
expected
and
signaled
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.
The
rate
sets
what
banks
charge
each
other
for
overnight
lending
but
feeds
through
to
many
forms
of
consumer
debt.
The
outlook
for
three
cuts
came
from
the
Fed’s
“dot
plot,”
a
closely
watched
matrix
of
anonymous
projections
from
the
19
officials
who
comprise
the
FOMC.
The
chart
provides
no
indication
for
the
timing
of
the
moves.
Chair
Jerome
Powell
said
the
Fed
also
did
not
elaborate
on
timing
but
said
he
still
expects
the
cuts
to
come,
as
long
as
the
data
cooperate.
Futures
markets
following
the
meeting
were
pricing
in
a
nearly
75%
probability
that
the
first
cut
comes
at
the
June
11-12
meeting,
according
to
the
CME
Group’s
FedWatch
gauge.
“We
believe
that
our
policy
rate
is
likely
at
its
peak
for
this
type
of
cycle,
and
that
if
the
economy
evolves
broadly
as
expected,
it
will
likely
be
appropriate
to
begin
dialing
back
policy
restraint
at
some
point
this
year,”
Powell
said
at
his
post-meeting
news
conference.
“We
are
prepared
to
maintain
the
current
target
range
for
the
federal
funds
rate
for
longer
if
appropriate.”
The
plot
indicated
three
cuts
in
2025
–
one
fewer
than
the
last
time
the
grid
was
updated
in
December.
The
committee
sees
three
more
reductions
in
2026
and
then
two
more
in
the
future
until
the
fed
funds
rate
settles
in
around
2.6%,
near
what
policymakers
estimate
to
be
the
“neutral
rate”
that
is
neither
stimulative
nor
restrictive.
The
grid
is
part
of
the
Fed’s
Summary
of
Economic
Projections,
which
also
provides
estimates
for
gross
domestic
product,
inflation
and
unemployment.
The
dot
assortment
skewed
somewhat
hawkish
from
December
in
terms
of
deviations
from
the
median,
but
not
enough
to
change
this
year’s
projections.
Markets
rallied
following
the
release
of
the
FOMC
decision.
The
Dow
Jones
Industrial
Average
finished
the
session
up
401
points,
or
just
over
1%.
Treasury
yields
headed
mostly
lower,
with
the
benchmark
10-year
note
most
recently
at
4.28%,
off
0.01
percentage
point.
“The
sum
total
of
this
‘no
news
is
good
news’
press
conference
is
that
markets
continue
to
have
a
green
light
to
run
higher,”
said
Chris
Zaccarelli,
chief
investment
officer
at
Independent
Advisor
Alliance.
“We
aren’t
surprised
to
see
the
initial
reaction
from
investors
to
be
to
push
stock
prices
up
and
expect
that
to
continue
until
some
new
shock
hits
the
system
because
this
Fed
isn’t
going
to
stand
in
the
way
of
the
bull
market.”
Raises
GDP
forecast
Officials
sharply
accelerated
their
projections
for
GDP
growth
this
year
and
now
see
the
economy
running
at
a
2.1%
annualized
rate,
up
from
the
1.4%
estimate
in
December.
The
unemployment
rate
forecast
moved
slightly
lower
from
the
previous
estimate
to
4%,
while
the
projection
for
core
inflation
as
measured
by
personal
consumption
expenditures
rose
to
2.6%,
up
0.2
percentage
point
from
before
but
slightly
below
the
most
recent
level
of
2.8%.
The
unemployment
rate
for
February
was
3.9%.
The
outlook
for
GDP
also
rose
incrementally
for
the
next
two
years.
Core
PCE
inflation
is
expected
to
get
back
to
target
by
2026,
same
as
in
December.
The
FOMC’s
post-meeting
statement
was
almost
identical
to
the
one
delivered
at
its
last
meeting
in
January
save
for
an
upgrade
on
its
job
growth
assessment
to
“strong”
from
the
January
characterization
that
gains
had
“moderated.”
The
decision
to
stand
pat
on
rates
was
approved
unanimously.
Markets
had
been
watching
closely
for
clues
about
where
the
Fed
would
go
from
here
with
monetary
policy.
Earlier
this
year,
traders
in
the
fed
funds
futures
market
had
strongly
priced
in
a
likelihood
that
the
central
bank
would
start
cutting
at
this
week’s
meeting
and
continue
doing
so
until
it
had
totaled
as
many
as
seven
decreases
by
the
end
of
the
year.
However,
recent
developments
have
changed
that
outlook
dramatically.
Higher-than-expected
inflation
data
to
start
2024
triggered
caution
from
top
Fed
officials,
and
the
January
FOMC
meeting
concluded
with
the
central
bank
saying
it
needed
more
evidence
that
prices
were
decelerating
before
it
would
gain
“greater
confidence”
on
inflation
and
start
cutting.
Statements
from
Powell
and
other
policymakers
since
then
added
to
the
sentiment
of
a
patient,
data-driven
approach,
and
markets
have
had
to
reprice.
Powell
and
his
cohorts
have
indicated
that
with
the
economy
still
growing
at
a
healthy
pace
and
unemployment
below
4%,
they
can
take
a
more
measured
approach
when
loosening
monetary
policy.
“The
economy
is
strong,
inflation
has
come
way
down,”
Powell
said,
“and
that
gives
us
the
ability
to
approach
this
question
carefully
and
feel
more
confident
that
inflation
is
moving
down
sustainably
at
2%
when
we
take
that
step
to
begin
dialing
back
our
restrictive
policy.”
The
expectation
heading
into
this
week’s
meeting
is
for
the
first
cut
to
happen
in
June
and
two
more
to
follow,
bringing
markets
and
Fed
officials
back
into
alignment.
Beyond
that,
markets
also
were
looking
for
some
direction
on
the
Fed’s
balance
sheet
reduction
program.
In
a
process
that
began
in
June
2022,
the
central
bank
is
allowing
up
to
$60
billion
a
month
in
maturing
proceeds
from
Treasurys
plus
up
to
$35
billion
in
mortgage-backed
securities
to
roll
off
each
month
rather
than
be
reinvested.
The
process
is
often
referred
to
as
“quantitative
tightening”
and
has
resulted
in
about
a
$1.4
trillion
drawdown
in
the
Fed’s
holdings.
Powell
confirmed
the
issue
was
discussed
at
the
meeting
but
noted
that
no
decisions
were
made
on
the
extent
and
timing
of
the
potential
balance
sheet
reduction.
“While
we
did
not
make
any
decisions
today,
the
general
sense
of
the
committee
is
that
it
will
be
appropriate
to
slow
the
pace
of
runoff
fairly
soon,
consistent
with
the
plans
we
previously
issued,”
he
said.
