FOMC Still Holding Rates Steady – Forbes Advisor – Technologist
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As expected, the Federal Open Market Committee has chosen once again to maintain its target federal funds rate at the current level between 5.25% and 5.5%.
The bond market was already pricing in a 99% chance interest rates would remain unchanged following this afternoon’s meeting, according to CME Group’s FedWatch Tool.
The core personal consumption expenditures price index, or core PCE, which is the Fed’s preferred measure of inflation, is still higher than the Fed’s 2% target. On April 26, the Bureau of Economic Analysis reported that core PCE remained steady in the month of March at 2.8%, which was the same as February’s reading.
The consumer price index, or CPI, another leading measure of inflation, came in even higher, at 3.5% for the month of March, while core CPI, which excludes volatile food and energy prices, registered at 3.8% for the month.
In addition, the U.S. Bureau of Labor Statistics, disclosed on April 5 that the unemployment rate hit 3.8% in March, down fractionally from February’s 3.9%, while adding 303,000 jobs to the U.S. economy that month.
Coupling those strong employment numbers with how inflation remains higher than the desired 2% target, it’s no surprise the Fed has opted to keep interest rates unchanged. However, many investors are still hoping for rate cuts sometime in 2024.
CME Group predicts there’s a better than 60% chance the Fed will cut rates by September.
However, high interest rates and inflation have finally started to slow the stock market’s growth.
At the time of the Fed’s last meeting in March, the S&P 500 Index, which functions as a proxy for the broader stock market, had returned 8.9% year-to-date. By the end of April, however, the index had only returned 6.0% for the year.
Federal Open Market Committee (FOMC) FAQs
What is the Federal Reserve?
The Federal Reserve is the central bank of the United States, and is generally considered to be the most powerful central bank in the world. Often referred to as the Fed, it was founded to direct monetary policy and manage the financial system. A seven-member board governs the Fed, and there are 12 Federal Reserve Banks in regions throughout the U.S.
The Federal Open Market Committee (FOMC) is the main policy making body of the Fed. The FOMC sets the federal funds target rate and makes other monetary policy decisions for the Fed. The FOMC meets eight times a year to vote on interest rates and policy priorities.
There are 12 members of the FOMC:
- The seven members of the Fed Board of Governors, led by Fed Chair Jerome Powell.
- Five of the 12 Federal Reserve Bank presidents, although the head of the Federal Reserve Bank of New York is a permanent member of the FOMC. The other four voting positions are filled on a rotating basis by the presidents of the other Federal Reserve Banks across the country. Even though most presidents don’t vote, they can all attend the meetings and debate policy.
When is the next FOMC meeting?
The next FOMC meeting is scheduled for June 11-12. The FOMC hold eight scheduled meetings a year, one every six weeks or so. The committee can also meet whenever it feels necessary and believes that it needs to act, such as during a financial crisis.
When are the FOMC minutes released?
The FOMC releases minutes of its meetings three weeks after the most recent meeting. A full transcript isn’t available for a full five years after a meeting.
How many times will the FOMC cut rates in 2024?
The FOMC raised interest rates 11 times from 2022 to 2023, putting the federal funds target rate at 5.25% to 5.50%. However, the Fed has not rasied rates since July 2023.
The CME Group’s FedWatch tool shows a better than 60% chance the Fed will cut rates by its September meeting.
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