Fed Holds Policy 2% Steady Now

Fed Maintains Steady Policy and Exhibits Greater Reluctance Than Anticipated on September Rate Cut
Markets had factored in a 100% possibility of a rate decrease at the bank’s September meeting before today’s meeting.
As predicted, the Fed maintained its current course of policy, but its announcement was more aggressive than most had predicted.
Chairman Jerome Powell hinted that the central bank was “moving closer” to the possibility of rate cuts during his news conference following the meeting.
The U.S. Federal Reserve maintained its benchmark fed funds rate range of 5.25%–5.50% as anticipated. Surprisingly, perhaps, the Fed offered no signal that a rate cut in September is a given.

In its policy statement, the central bank stated, “Inflation has eased over the past year but remains somewhat elevated.” “The economic outlook is uncertain, and the [FOMC] is attentive to the risks to both sides of its dual mandate,” said the statement.
Bond rates and the currency increased somewhat in the minutes that followed the unexpectedly hawkish statement, but they both finished the day lower.
Although it slightly decreased to $66,550, the price of bitcoin (BTC) increased over the previous day. U.S. stocks finished the day considerably higher, with the S&P 500 up 1.6% and the Nasdaq up 2.4%.

In early 2022, the Fed started an unprecedented run of tighter policy to combat the then-raging inflation, which saw the fed funds rate rise from 0% to 5.25%–5.50% in less than 18 months.
Since the central bank has been hesitant in easing while inflation has steadfastly maintained much above its 2% target, the rate has stayed there for more than a year.
Markets have fully priced in at least 25 basis points of rate cuts by the mid-September meeting, according to CME Fed Watch, prior to today’s meeting. Looking ahead, markets had factored in a nearly 60% possibility of 75 basis points of rate decreases by the time of the Fed’s December 2024 final meeting.

Fed Chair Jerome Powell stated at his news conference following the meeting that new data has increased confidence that inflation is returning to the 2% objective. He stated that although decisions for September have not been made, “broad sense is that we’re moving closer” to lowering rates.

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