All Eyes on the Federal Reserve - What to know this week
All Eyes on the Federal Reserve: What to know this week
Josh Schafer·Reporter Sun, March 17, 2024
The major US stock indexes have backed off record highs ahead of the Federal Reserve's all-important March meeting.
On Wednesday, that tension will finally be resolved.
The US central bank is set to release its latest monetary policy decision and updated economic projections at 2:00 p.m. ET on Wednesday afternoon, with investors looking for an answer to one key question: Does the Fed still think it will cut rates three times in 2024?
Recent data showing inflation hasn't dropped as fast as expected has pushed out market forecasts for Fed rate cuts this year to three from six. The question, then, is whether a few months of stubborn inflation data will be enough to prompt a further tweak from the Fed.
What the Fed rate decision means for bank accounts, CDs, loans, and credit cards
Hal Bundrick Updated Thu, Feb 1, 2024
Fed watchers are still holding their breath for an interest rate cut.
After inflation peaked at 9.1% in June 2022, the Federal Reserve worked to tame consumer prices with a series of 11 interest rate hikes over the ensuing months, and inflation stood at 3.4% in December 2023.
With a target of 2%, the Fed's decision on Jan. 31, 2024, to pause rate hikes for the fourth month in a row shows the central bank believes it's winning the fight against inflation — but remains watchful.
So, interest rates are still elevated, and any hope of the Fed lowering rates remains just that. Hope.
How Monetary Policy Works
The Fed controls one interest rate: the federal funds rate, which is the short-term rate banks use to borrow from each other. The latest action keeps the target range for the federal funds rate at 5.25-5.50%. Fed interest rate decisions filter through the financial world, impacting virtually every facet of borrowing costs and saving rates.
Interest rate management is monetary medicine the Fed uses to:
Slow the economy by raising interest rates in an effort to tame rising costs (high inflation) as measured by the consumer price index.
Help mount a recovery when we're at the opposite end of an economic cycle by lowering interest rates as an injection of liquidity into the financial system.
Allow past moves to take root while the Fed considers future actions by holding rates steady.
What the Fed says is ahead for interest rates
In a statement on Jan. 31, the Federal Open Market Committee said it "does not expect it will be appropriate to reduce the target [interest rate] range until it has gained greater confidence that inflation is moving sustainably toward 2%."
However, the FOMC didn't hint as to when that "confidence" would be achieved.
Here’s How The Fed’s Current Interest Rate Stance Could Trickle Down To Your Loans And Accounts.
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