The US Federal Reserve has chosen to maintain its key interest rate at its current level and uphold its projection of three rate cuts for the year, despite concerns about persistent inflation. This decision keeps the benchmark short-term rate at a 23-year high, underlining the Fed’s dedication to combating inflation. Although there were expectations for rate cuts, Fed officials have revised their forecasts for economic growth and inflation upwards for 2024, anticipating a 2.1% growth in the economy. Inflation projections suggest a year-end figure of 2.4%, with core inflation dipping slightly from 2.8% to 2.6%.
Recent economic indicators point to a robust expansion in economic activity, with notable job gains and a consistently low unemployment rate. Despite a moderation in inflation over the past year, it remains relatively high.
The Committee’s primary objectives are to achieve maximum employment and maintain inflation at a steady 2% over the long term. It perceives the risks to achieving these goals as gradually balancing out. Nevertheless, the economic outlook remains uncertain, and the Committee remains vigilant regarding inflation risks.
To support its objectives, the Committee has chosen to maintain the federal funds rate target range at 5.25% to 5.5%. Any adjustments to this range will be carefully considered based on incoming data, evolving economic conditions, and risk assessments. The Committee does not anticipate lowering the target range until it is more confident that inflation is consistently trending towards 2%.
Furthermore, the Committee will continue its gradual reduction of Treasury securities, agency debt, and agency mortgage-backed securities holdings as outlined in previous plans. It remains unwavering in its commitment to restoring inflation to the 2% target.
The Committee will persist in monitoring incoming data to evaluate the appropriate stance of monetary policy. It stands ready to adjust policy as necessary should risks emerge that could hinder the achievement of its goals. This assessment will consider various factors, including labor market conditions, inflationary pressures, inflation expectations, and domestic and international financial developments.
Economists hold differing views on whether recent high inflation readings signify a temporary fluctuation or a longer-term challenge in reaching the Fed’s 2% target.
https://www.federalreserve.gov/monetarypolicy/files/monetary20240320a1.pdf
Important Information:
Warren Gerow is an independent investment wealth consultant to Sightline Wealth Management.
Sightline Wealth Management LP (“Sightline”) is an investment dealer and is a member of the Canadian Industry Regulation Organization (CIRO) and the Canadian Investor Protection Fund (CIPF). Sightline provides management and investment advisory services to high-net-worth individuals and institutional investors.
Sightline Wealth Management LP is a wholly owned subsidiary of Ninepoint Financial Group Inc. (“NFG Inc.”). NFG Inc. is also the parent company of Ninepoint Partners LP, it is an investment fund manager and advisor and exempt market dealer. By virtue of the same parent company, Sightline is affiliated with Ninepoint Partners LP. Information and/or materials contained herein is for information purposes only and does not constitute an offer to sell or solicitation to purchase securities of any issuer or any portfolio managed by Sightline Wealth Management or Ninepoint Partners, including Ninepoint managed funds.
The opinions and information contained in this article are those of Sightline Wealth Management (“Sightline”) as of the date of this article and are subject to change without notice. Sightline endeavors to ensure that the content has been compiled from sources that we believe to be reliable. The information is not meant to be used as the primary basis of investment decisions and should not be constructed as advice. Each investor should obtain independent advice before making any investment decisions.