Federal Reserve Maintains Rates at 5.25% to 5.50% Target, Refuses to Guide When It May Cut - 2024

The US Federal Reserve concluded its first 2-day Fed Open Markets Committee meeting of 2024 holding interest rates at the current 5.25 to 5.50% target, as expected. The Fed funds target rate has been at this level since July 2023.

There has been substantial improvement in curbing inflation, but there remains concern that the decline may not be anchored and could reverse.With the economy and the consumer so strong, there remains a risk of price - wage spiral inflation where consumers continue to drive up the price of goods and services.

So, it appears that the Fed is certainly finished raising rates and the Fed statement no longer includes "policy firming" language about possible additional rate increases.

Yet, at the same time, the Fed is not prepared to outline any time frame for its first rate cut of this cycle.  The committee's statement saying that it will not reducing the Fed funds rate until it is certain that inflation is headed back to its 2% target.

We began 2024 with 85% of market participants expecting the first rate cut in March.Prior to today's announcement, only 50% of market participants were expecting such a cut. During Chairman Jay Powell's press conference today, he said that he would not bet on a cut in March. Rate cuts however are likely coming at the FOMC's May or June meeting.