Federal Reserve Holds Rates But Sees 3 Cuts in ’24 Despite Inflation.

At its March meeting, the Federal Reserve left its key interest rate unchanged at a 23-year high of 5.25% to 5.5% for a fifth straight meeting, but stuck to its forecast of three rate cuts this year despite signs that inflation may stay elevated longer. The decision means that Americans will continue to pay higher borrowing costs, while the Fed continues to battle sharp price increases. At the conclusion of this month’s two-day meeting, the Fed repeated that it does not expect it will become appropriate to reduce the target range until it has gained greater confidence that inflation (now close to 3%) is moving sustainably toward the Fed’s 2% goal. Powell said, “Markets believe we will achieve that goal and they should believe that because that’s what will happen over time, but we stress over time.” Officials made it very clear that they aren’t backing away from their view that rates will be able to come down, despite data showing that inflation remains stubborn. Projections show that the Fed intends to end the year at a rate around a median of 4.6%. It is believed that if the Fed had moved closer to two cuts from its original three cut plan, markets could have been sent spiraling. Nevertheless, the Fed’s dot plot was very close to being an even split between forecasts for two and three rate cuts this year. Louis Navellier, chief investment officer at Navellier Private Client Group said, “I think we dodged a bullet…The FOMC statement was still very dovish.” Powell reiterated that, “We would, of course, love to get great inflation data.” And further that during the second half of 2023, the U.S. saw “really good inflation data,” but officials knew and warned that the path ahead would be “bumpy.” Increases in January and February certainly proved that point. “So now we’re looking for more good data and we would certainly welcome it,” concluded Powell, while assuring everyone that he is keeping a watchful eye for any signs of trouble that may emerge from employment data, but so far, the broader workforce trend looks to be in “good shape.”