Key Points from the Federal Reserve Meeting
- The Federal Reserve has decided to maintain its benchmark interest rates at 5.25-5.50 per cent for the fifth consecutive meeting.
- Despite persistent inflation concerns, the Federal Reserve remains poised for potential rate cuts in 2024.
- The Fed’s decision aims to balance maximum employment and stable inflation objectives.
- The central bank foresees three potential rate cuts in 2024, signaling a shift in monetary policy.
Revised Economic Projections
The Federal Reserve has revised its economic projections:
- Anticipating a stronger GDP growth rate of 2.1 per cent for 2024.
- ‘Core’ inflation projection slightly raised to 2.6 per cent.
- Unemployment rate forecast adjusted downward to 4 per cent for 2024.
Market Reaction and Investor Optimism
Following the Fed’s announcement:
- The S&P 500 surpassed the historic 5,200-mark for the first time, signaling investor optimism.
- The Nasdaq 100 experienced a notable uptick.
- Bond yields exhibited a downward trend, with two-year yields declining by seven basis points.
- The yield on 10-year Treasuries dropped by two basis points.
Federal Reserve’s Strategy Adjustment
Federal Reserve Chair Jerome Powell indicated a forthcoming adjustment:
- Plans to slow the pace of asset sales in the near future.
- Aims to mitigate liquidity concerns and provide greater flexibility to address economic challenges.
Future Rate Cut Possibility
Despite maintaining a steady stance on rates:
- Powell reiterated the likelihood of initiating rate cuts later in the year, contingent upon economic data.
- Market indicators suggest a 75 per cent probability of the first rate cut occurring during the June 11-12 meeting.
