Federal Reserve Meeting
As we expected, the Federal Reserve continued to pause its interest rate hiking activity. Instead, they focused on warning the market that more rate increases might happen if needed.
The Fed uses words as well as rate changes to manage inflation. This will continue as a way to keep the economy under check.
Our base case view is that the Federal Reserve will not raise interest rates this year. We believe that it’s entirely possible that the Federal Reserve may decrease interest rates in the first quarter of 2024. It will all depend on GDP growth, inflation, employment data, and overall economic trends.
A recent CNBC article highlighted the Fed’s decision this week. See excerpts below.
"The Federal Reserve held interest rates steady in a decision released Wednesday, while also indicating it still expects one more hike before the end of the year and fewer cuts than previously indicated next year.
That final increase, if realized, would do it for this cycle, according to projections the central bank released at the end of its two-day meeting. If the Fed goes ahead with the move, it would make a full dozen hikes since the policy tightening began in March 2022.
Markets had fully priced in no move at this meeting, which kept the fed funds rate in a targeted range between 5.25%-5.5%, the highest in some 22 years. The rate fixes what banks charge each other for overnight lending but also spills over into many forms of consumer debt.
While the no-hike was expected, there was considerable uncertainty over where the rate-setting Federal Open Market Committee would go from here. Judging from documents released Wednesday, the bias appears toward more restrictive policy and a higher-for-longer approach to interest rates.”