FameEX Hot Topics | Powell: Economic Growth Continues, Yet Inflation Remains 'Excessively High' for Rate Adjustment

The Federal Open Market Committee (FOMC) convened on Wednesday, March 20, 2024, announcing a decision to maintain the federal funds rate unchanged for the foreseeable future. Emphasizing a cautious approach, the committee stressed its reluctance to lower the target rate until there is a notable assurance of sustainable inflation movement toward the coveted 2% mark.

Amid initial speculations favoring a rate cut in March 2024, the U.S. Federal Reserve opted to uphold the federal funds rate at its current range of 5.25% to 5.5%, deferring potential adjustments to the June 2024 FOMC gathering. The Fed's stance underscores a commitment to diligent scrutiny of incoming data, evolving economic outlooks, and risk balances before considering any alterations to the rate target. Contrary to expectations, inflation has exhibited persistent growth over the past two months, prompting the FOMC to reiterate its strong commitment to restoring inflation to the 2% objective. Despite this, major stock market indices exhibited minimal movement both before and after the FOMC report release, with investors eagerly awaiting insights from Fed Chairman Jerome Powell.

Market reactions followed the announcement of a 75 basis points reduction in the dot plot for 2024, hinting at a potential anticipation of three rate cuts in the upcoming months. This development translated into subdued bond yields while equities enjoyed a positive outlook. Similarly, the cryptocurrency market, including bitcoin (BTC) and the broader crypto economy, remained relatively stable post-Fed announcement, with BTC witnessing a modest 1.6% uptick following Powell's press statements. Meanwhile, the prices of precious metals such as gold and silver held steady.

Addressing the press, Powell acknowledged a substantial easing in inflation while highlighting its persistently high levels. He acknowledged significant economic progress but cautioned against assured ongoing progress, citing uncertainties in the path forward. Economist Peter Schiff, reflecting on Powell's statements, noted the Fed's commitment to eventually bringing inflation back to 2% without specifying a timeframe. This ambiguity, Schiff suggested, leaves room for interpretation, potentially extending the timeline for achieving the inflation target.

In summary, the FOMC's decision to maintain the federal funds rate reflects a cautious approach amid evolving economic conditions, emphasizing the importance of sustained progress towards the inflation target while acknowledging uncertainties in the economic trajectory.

Disclaimer: The information provided in this section is for informational purposes only, doesn't represent any investment advice or FameEX's official view.