A busy January ends with a bigger-than-expected Fed decision, even though there is zero chance that interest rates will actually move. The central bank is likely to keep interest rates unchanged at 5.25-5.5%, the highest level in 22 years, for the fourth consecutive meeting. Here's what you need to know:
#1 Economic background:
The Fed's first meeting in 2024 will come at a time of economic expansion. In retrospect, with his 3.3% GDP growth in the fourth quarter, we are once again asking, “What is a recession?” Then there's inflation, which we now know is finally on its way back down towards his long-awaited 2% level. Sounds like a great recipe for cutting, but is it really?
#2 Words of March:
Investors are considering a first rate cut at its second meeting in 2024, but will the Fed give its nod? Loretta Mester of the Cleveland Fed says: “probably” too fast.Fed Director Christopher Waller appears to agree, stating in effect this month: “An idiot is coming in.” – and reductions should be implemented “Methodically and carefully.” Next is Austan Goolsby of the Chicago Fed. He needs to see more data…
#3 Balance Sheet:
This may not be the most interesting part of the Fed's activities, but it has potentially serious implications for investors. Early in the pandemic, the Fed began strengthening its balance sheet, including by purchasing large amounts of government bonds. It is known as quantitative easing. A reversal of that process, known as QT or quantitative tightening, began in 2022. Now, the future of that policy is increasingly being talked about by investors. We'll be monitoring all the action from the important Fed meeting here on Yahoo Finance. Do not miss it.
video transcript
– A busy January ends with a bigger-than-expected Fed decision, even though there is zero chance that interest rates will actually move. The central bank is likely to keep interest rates unchanged at 5.25-5.5%, the highest level in 22 years, for the fourth consecutive meeting. Here's what you need to know:
First, there is the economic background. The first Fed meeting of 2024 may be backward-looking, taking place during a period of economic expansion, but the 3.3% GDP growth rate in the fourth quarter reminded us of the question: What is a recession? ” he asks. Then there's inflation. Finally, we see that we are heading back down towards the much-awaited 2% level. Sounds like a great recipe for cutting, but is it really?
The second is the word “March.” Investors are putting the second meaning of 2024 on the table for the first rate cut. But will the Fed nod in that direction? Loretta Mester of the Cleveland Fed says it's probably too early. Federal Reserve President Christopher Waller seemed to agree this month, effectively saying that interest rate cuts should be carried out systematically and carefully because fools will rush in. Next is Austan Goolsby of the Chicago Fed. He needs to see more data.
The third is the balance sheet. This may not be the most interesting part of the Fed's activities, but it has potentially serious implications for investors. At the beginning of the pandemic, the Fed began strengthening its balance sheet by purchasing large amounts of government bonds. It is known as quantitative easing. A reversal of this process, known as QT (Quantitative Tightening), began in 2022. Now, the future of that policy is increasingly being talked about by investors.
We monitor all Fed action and important meetings here on Yahoo Finance. Do not miss it.
