The Federal Reserve has concluded its two-day meeting as it faces the question of how to lower rising prices without hurting economic growth.
In a widely anticipated move, the Fed decided to maintain its benchmark interest rate at the current level of 5.25% to 5.5%. This rate has held steady since July 2023, marking a 23-year-high.
The Fed maintained its outlook for three rate cuts in 2024 https://t.co/7DnmRHBaTG
— Bloomberg (@business) March 20, 2024
Initially, the Fed had forecasted three rate cuts for this year. However, the rising inflation has raised concerns. Some leading research firms, including Barclays and JPMorgan Chase, predict that the Fed will adjust its median forecast to two rate cuts in 2024.
However, many Fed policymakers still believe there will be three rate reductions this year, with fewer in 2025 and 2026. They expect interest rates to be higher in the long run compared to their December projections.
Officials also now anticipate that “core” inflation, which excludes the fluctuating costs of food and energy, will exceed earlier predictions for this year.
Fed officials expect the first rate cut to occur in the summer.
Federal Reserve Chairman Jerome Powell acknowledged the ongoing battle against inflation during a post-meeting press conference.
“We continue to make good progress in bringing inflation down,” Powell stated. However, he noted that the journey back to the Fed’s 2% inflation target wouldn’t be easy.
Regarding rate cuts, Powell added, “We want to feel more confident,” emphasizing the importance of inflation aligning with the Fed’s 2% target.
US stocks experienced widespread gains on Wednesday. For the first time, the S&P 500 surpassed the 5,200 mark, finishing the day up by 0.9%. Similarly, the Dow Jones Industrial Average set a new benchmark, climbing 401 points, or 1%, to close at 39,511.34. The Nasdaq Composite also achieved a new peak at 16,369.41.
Recent discussions have ignited debate surrounding the Federal Reserve’s political leanings, suggesting that its decision to pivot to rate cuts was aimed at supporting President Biden’s administration. This follows observations that despite Federal Reserve Chair Powell deeming it “premature” to discuss rate cuts in December, the Fed projected three rate cuts in 2024 just two weeks later, coinciding with polling data unfavorable to Biden.
Additionally, reports of the rate cuts starting this summer, just ahead of the presidential election, further fuel accusations of the Fed’s actions being politically motivated.
I have a lot of respect for Rep. Khanna, but this is crazy. A sitting member of Congress says the quiet part out loud, confirming what many of us (like @DavidSacks) suspected: last month's Fed pivot to rate cuts was politically motivated to help Biden.
For context, as recently… pic.twitter.com/Q83VTCHHWf
— James Fishback (@j_fishback) January 10, 2024
