Recent inflation data has been hotter than anticipated, but the Fed delivered a fairly friendly message Wednesday.
Topline
The Federal Reserve still expects to slash interest rates multiple times this year even as inflation remains well above its target, sending a welcome message to investors Wednesday.Key Facts
The Fed’s policy-setting Open Markets Committee opted to hold the target federal funds rate firm at the 5.25% to 5.5% level it’s sat since last summer, according to a release from the central bank following the panel’s Tuesday and Wednesday meetings.
But more pressing from the Fed’s announcement was the revelation that Fed staff’s median year-end forecasts still call for 75 basis points worth of interest rate cuts, a consensus that was put in doubt as early 2024 inflation data came in hotter than expected.
Equities responded positively to the Fed release, with 10-year U.S. Treasury yields dipping about five basis points and the S&P 500 gaining slightly immediately after (lower bond yields means higher value of bonds).
The Fed’s median long-run forecast for interest rates did tick upward from 2.
