As expected, the Federal Reserve made no changes to the federal funds rate on Wednesday afternoon, keeping the range where it has been since last July: between 5.25% and 5.5%. The markets trended modestly higher on the news, hopeful that the Fed stays on course to lower rates, possibly as early as this spring.
The S&P 500 was up 35 points, or 0.7%, Wednesday afternoon as of three p.m. Eastern, while the Nasdaq Composite jumped 159 points, or 1%, and the Dow Jones Industrial Average moved 147 points higher, or 0.4%.
Still on course for 3 cuts in 2024
“Recent indicators suggest that economic activity has been expanding at a solid pace. Job gains have remained strong, and the unemployment rate has remained low. Inflation has eased over the past yr but stays elevated,” the Fed said in an announcement released Wednesday afternoon. “The committee seeks to attain maximum employment and inflation at the speed of two% over the longer run. The committee judges that the risks to achieving its employment and inflation goals are moving into higher balance. The economic outlook is uncertain, and the committee stays highly attentive to inflation risks.”
The Fed said it won’t move to lower rates until it has “gained greater confidence that inflation is moving sustainably toward 2%.” Inflation as measured by the Personal Consumption Expenditures (PCE) price index was 2.4% in January, the most recent month for which data is obtainable. The PCE has historically been a key indicator for the Fed. Inflation as measured by the Consumer Price Index (CPI) was 3.2% in February.
As well as, the Fed said it is going to proceed to observe economic data and be prepared to regulate its stance if risks emerge. It can also proceed reducing its holdings of Treasury securities, agency debt and agency mortgage-backed securities.
In a 2:30 p.m. Eastern press conference following the discharge, Fed Chair Jerome Powell reiterated commentary from the previous meeting that rates have likely peaked for this cycle, adding that they expect to begin dialing back rates this yr.
There had been some concern that the Fed’s economic projections, or “dot plot,” might change, signaling two rate cuts in 2024 as an alternative of three. Nonetheless, the consensus amongst Fed members calls for rates to be at a variety of 4.5% to 4.75% at the tip of the yr, which might effectively be a three-quarter-point cut. The consensus for 2025 moved from 4 rate cuts in past projections to 3, cutting rates to a variety of three.75% to 4%. The consensus for 2026 calls for rates to be at a variety of three% to three.25%.
What’s next?
Powell said the Federal Open Market Committee would make decisions “meeting by meeting” and wouldn’t comment on the timing of the primary rate cut. He reiterated that the FOMC would proceed to observe incoming inflation and economic data and make decisions accordingly. The following meeting is April 30-May 1, followed by one on June 11-12.
The market looked as if it would take the news in stride, as the outcomes were as expected. The most important movers on Wednesday were related to bitcoin and cryptocurrencies.
Several leading bitcoin-mining stocks were leading the best way on Wednesday. CleanSpark (NASDAQ:CLSK) was one among the highest gainers on the day, up nearly 19% to over $19 per share, while Marathon Digital Holdings (NASDAQ:MARA) was up 13% to around $22 per share. Riot Platforms (NASDAQ:RIOT) was up 10.6% to $12.27 per share, and bitcoin also gained on Wednesday, jumping about 6% to over $65,400.