#FederalReserve #InflationControl #EconomicOptimism
Federal Reserve Maintains Steady Course Amid Modest Inflation Progress and Job Market Improvements
Today, Federal Reserve Chair Jerome Powell expressed cautious optimism during a press conference, acknowledging "modest further progress" toward the central bank's 2% inflation objective. Despite recent strong jobs data, Powell indicated that there might be slight overstatements, with benchmark revisions potentially on the horizon.
The U.S. labor market continues to show signs of improvement, with nonfarm payrolls expanding by 272,000 in May, surpassing expectations. Powell emphasized that the Fed is observing a gradual cooling trend and moving towards better balance.
Inflation data has not yet provided the Federal Reserve with the confidence it needs to reach its 2% goal. Central bank leaders acknowledged that there has been "modest" progress in getting price growth under control. Previously, the Fed had stated that there was a "lack of" recent progress.
The most recent string of inflation readings indicates that price pressures are easing, according to Powell. However, longer-term inflation expectations remain well anchored.
Despite the progress, the Fed is maintaining its restrictive monetary policy stance. Economist Jeffrey J. Roach believes that the central bank will likely keep interest rates elevated as it seeks sustainable progress toward its 2% inflation target.
Federal Reserve Chair Jerome Powell began his news conference by noting that the U.S. economy has made considerable progress toward both of the central bank's goals: bringing inflation down to 2% and maximizing employment.
One question that traders will be looking for from Powell's press conference is how much Wednesday's consumer price index report factored into the Fed's projections. Seema Shah, chief global strategist at Principal Asset Management, believes that the Fed will need to see more evidence of softer price pressures in the coming months before it can be sufficiently confident to ease.
The $S&P 500, $Nasdaq Composite, and $Dow Jones Industrial Average held onto their gains after the Fed's decision, with the broad market benchmark up 1%, the tech-heavy index up nearly 1.8%, and the $Dow Jones Industrial Average adding about 32 points.
In the Fed statement, central bank leaders acknowledged that they had begun seeing "modest" further progress toward the goal of 2% inflation. The Fed kept its key interest rate unchanged at a range of 5.25% to 5.5%, but adjusted its rate forecast to one reduction this year, down from three in March.
Consumers have been affected by the Fed's rate-hiking campaign, with mortgage rates reaching 7.15% and credit card rates exceeding 20.68%. However, consumers' fortunes have improved when it comes to saving, with the annual percentage yield on a six-month certificate of deposit now at 3.406%. The higher rates have also been a boon for fixed-income investors, as the 10-year Treasury yield topped 4.4% last week.
All eyes are on the Fed's dot plot of interest rate expectations as traders look for clarity on the rate cut path. The central bank's updates and latest rate decision are coming out just hours after May's consumer price index reading. The headline CPI reading held steady from April, but it rose 3.3% from a year earlier.
Original Article: https://www.cnbc.com/2024/06/12/fed-meeting-today-live-updates-on-june-fed-rate-decision.html
Leave a Reply