Fed Leaves Interest Rates Unchanged, Signals When Rate Cuts Could Begin (VIDEO)

With the market fixated on rate cuts in 2024, Fed Chair Jerome Powell provided several clues on when investors could expect those cuts to begin.

The U.S. Federal Reserve announced today that it would not raise interest rates in January 2024, leaving the central bank’s benchmark rate at a 23-year high. The Federal funds rate still sits at 5.25% – 5.5%.

Today’s hold on rates marks the fourth meeting in a row that the Fed did not raise interest rates. The current holding pattern comes after the Fed’s recent rate hike campaign, which began on March 2022 and saw the central bank aggressively raise rates 11 different times.

In a statement released today, the Fed provided its rationale for holding rates steady, writing:

“Recent indicators suggest that economic activity has been expanding at a solid pace. Job gains have moderated since early last year but remain strong, and the unemployment rate has remained low. Inflation has eased over the past year but remains elevated. The Committee seeks to achieve maximum employment and inflation at the rate of 2 percent over the longer run. The Committee judges that the risks to achieving its employment and inflation goals are moving into better balance. The economic outlook is uncertain, and the Committee remains highly attentive to inflation risks.”

Moving forward, the Fed indicated it wanted to avoid a potential inflation rebound by making sure it did not raise interest too early or too quickly.

Source: CNBC Television YouTube

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The Fed will meet next in March, with investors anticipating the first rate cut potentially coming then, but the Fed effectively dashed those hopes, indicating a March rate cut is now unlikely, according to today’s statement, which stated:

“The Committee does not expect it will be appropriate to reduce the target range for the federal funds rate until it has gained greater confidence that inflation is moving sustainably toward 2 percent.”

In the post-meeting press conference, Fed Chair Jerome Powell backed the sentiment of an unlikely March cut, commenting that:

“There was no proposal to cut rates.”  With a rate cut in March “probably not the most likely case.”

With inflation still hovering above the Fed’s 2% target, Powell added:

“We are looking for greater confidence that inflation is moving sustainably down to our goal.”

While investors were certainly disappointed by comments seemingly pushing back the first potential cut, the Fed did however indicate that it was likely closing the book on its aggressive rate hike campaign, with Powell stating:

“We believe that our policy rate is likely at its peak for this tightening 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.”

With the January 2024 Fed meeting done and dusted, when do you think the first rate cut will come? Answer this question in our new poll below.

New Poll: When will the #Fed‘s first rate cut in 2024 happen? ????#InterestRates

— Wealthy Venture Capitalist (@WealthyVC) January 31, 2024

Markets reacted negatively to today’s Fed announcement and press conference, which seemed to lower the odds of a rate cut at the next meeting in March.

The Dow Jones Industrial Average (DJI) closed trading today at 38,150.30, down -0.82%. The S&P 500 (SPX) closed the day at 4,845.65, down -1.61%, while the NASDAQ Composite (IXIC) finished at 15,164.01, down -2.23%.

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Disclaimer: Wealthy VC does not hold a long or short position in any of the stocks mentioned in this article.