Here are some views of market experts after the FOMC meeting in March.
The Federal Reserve maintained its key interest rate at a 23-year high range of 5.25-5.50%, during its March 2024 FOMC meeting. Any rate cut now could be a deterrent due to sticky inflation and its slow progress towards the Fed’s 2% target. However, maintaining rates at higher levels is damaging to the economy. So, when will the Fed’s first rate cut in its recent monetary policy tightening effort occur?
Fed officials predict three cuts to federal funds rate by year-end, with market participants anticipating the rate to begin cutting at its June meeting. The stock market is holding ground and the bullish sentiments among investors continue with no visible signs of any impediments.
Here are some views of market experts after the recent FOMC meeting
Chris Zaccarelli, Chief Investment Officer for Independent Advisor Alliance
The sum total of this “no news is good news” press conference is that markets continue to have a green light to run higher. We aren’t surprised to see the initial reaction from investors to be to push stock prices up and expect that to continue until some new shock hits the system because this Fed isn’t going to stand in the way of the bull market.
Viram Shah, CEO, Vested Finance
Although the Federal Reserve Chairman Jerome Powell’s commentary provided mixed signals, growth forecasts have been revised upwards, indicating a better outlook for the US economy. However, inflation remains higher than anticipated, and a rate cut will likely be implemented in June.
Subho Moulik, CEO & Founder, Appreciate, a SEBI and IFSCA registered fintech company
Now, all eyes will be trained on the personal consumption expenditure figures for February that will be released on March 29. These figures would serve as a touchstone to the question of whether the Fed will truly be in a position to push through with the first of the three rate cuts it has pencilled in for 2024.
Dhawal Ghanshyam Dhanani, International Equity Fund Manager, SAMCO Mutual Fund
Stocks have rallied since the last meeting despite a plunge in 2024 rate-cut expectations from 6 to 3 – interesting times! With BoJ scrapping radical interest rate regime, hiking interest rates in 17 years shows an independent approach undertaken by central banks across the globe post-COVID. Global markets will take its own sweet time to reset to these nuances.”
Larry Tentarelli, President and Founder, Blue Chip Daily Trend Report
The FOMC dot plot (FOMC members projections for future interest rate levels) remained unchanged at 3 cuts expected for 2024, which we view as a major positive. Chairman Powell stayed on message that the Fed would remain data dependent and that rate cuts were likely at some point later this year.
Jeffrey Roach, Chief Economist for LPL Financial
Investors should remember Fed dot plots are poor predictors of actual policy. Long-term investors should watch the U.S. dollar for any signs of risk
Bill Adams, Chief Economist for Comerica Bank
The Fed’s March Dot Plot maintained unchanged its forecast for the year-end fed funds rate target at 4.6%, meaning a range of 4.50% to 4.75%. That’s three-quarters of a percent below the current level, which was held unchanged in March as universally expected.
The Dot Plot held unchanged the projection for year-end PCE inflation at 2.4%, matching the increase in January. But the Fed raised the core PCE inflation forecast to 2.6% from 2.4%; it was 2.8% in January. The Dot Plot also raised the real GDP forecast to 2.1% from 1.4% and nudged down the unemployment rate forecast to 4.0% from 4.1%.
The Fed’s fourth-quarter unemployment rate projection looks low considering that the unemployment rate moved up to 3.9% in February, which was the highest since early 2022. Before rounding, February’s unemployment rate was 3.857%, close to October’s 3.841%. If unemployment surprises the Fed to the upside this year, that could motivate them to cut faster to balance their dual mandate for a strong job market and low inflation.
Comerica continues to expect the Fed to cut the fed funds target by three quarters of a percent over the course of 2024, most likely in quarterly cuts of a quarter percentage point each at their June, September, and December decisions.
Charlie Ripley, Senior Investment Strategist for Allianz Investment Management
Despite market and Fed expectations now aligned on the rate path over the medium term, there still is some work to be done with regards to the landing spot for policy rates over the long term. The long-run median dot still implies a Fed funds rate of 2.5% where market pricing is showing something closer to 3.5%.
Quincy Krosby, Chief Global Strategist for LPL Financial
In fact, three rate cuts are expected, albeit with the data-dependent Fed remaining cautious as it assimilates inflation-related reports coupled with general macro-related information on the economy, particularly the health of the labor market.
Adam Turnquist, Chief Technical Strategist
Since the start of the year, the Fed funds futures curve has shifted notably higher as the market dialed down rate cut expectations for the year from over six quarter-point cuts to the current implied probability of only three cuts. Tempered enthusiasm for rate cuts has largely been underpinned by a better-than-expected U.S. economy and signs of sticky inflation.
