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As expected, the Federal Reserve held rates steady at its meeting last week, according to Jeff Cox of CNBC. After its two-day policy meeting, the Fed announced it would maintain its benchmark overnight borrowing rate of 5.25% to 5.5%. Additionally, Fed officials predicted three quarter-percentage point cuts by the end of 2024, which would be the first reductions since the early days of the Covid pandemic in March 2020. |
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Source: CNBC (March 2024) Cox quotes Fed Chairman Jerome Powell: “We believe that our policy rate is likely at its peak for this type of cycle, and that if the economy evolves broadly as expected, it will likely be appropriate to begin dialing back policy restraint at some point this year…We are prepared to maintain the current target range for the federal funds rate for longer if appropriate.” The Mortgage Bankers Association’s (MBA) Chief Economist Mike Fratantoni comments on the rate decision: “The FOMC held rates unchanged at its March meeting and continued to signal its next move will be a rate cut. The only question is when. Their new projections indicate three cuts for 2024, unchanged from their December projections for 2024, but with one less rate cut expected in 2025. We are forecasting that the first rate cut will be in June, and a total of three rate cuts this year. The committee did not indicate any changes to the pace of quantitative tightening. We continue to expect longer-term rates, including mortgage rates, to decline gradually over the course of this year.” John Veit of JPMorgan Chase comments on the rate decision, highlighting that any rate cut decision would be based on current labor market conditions. Powell also highlighted the need for more data to confirm that inflation has reached the target of 2%. This aligns with JPMorgan’s prediction that the Fed will cut interest rates three times this year. Indeed, Megan Leonhardt of Barron’s reports that Powell is not seeing the cracks in the economy that he’d hope for to justify more immediate rate cuts. Powell believes the broader workforce trends look good, and the labor market is strong despite concerns about the low hiring rate. Powell acknowledged that some economists have expressed worries that increased layoffs could lead to a quick rise in unemployment. Nonetheless, Powell does not currently see any cracks in the labor market. |