Weekly Market Commentary
The Feds Voted to Hold Rates Steady
Posted on March 26, 2024
The Major Markets resumed their upward climb to all-time highs. The Nasdaq added just under three percentage points last week with the S&P 500 following not too far behind with a weekly gain of 2.29%. Going into the final week of the first quarter, these gains pushed the S&P 500 just above the Nasdaq year to date and logged a fresh all-time high in the index Thursday.
The gains were solid for most of the week with Friday being the notable exception in negative territory. Wednesday’s gains punctuated the week in large part due to the activity following the FOMC Meeting.
The meeting was more of the same from the Fed. Interest rates held steady at the 525-550 level, which was widely expected. In his prepared comments Fed Chairman Jerome Powell reiterated the committee’s ongoing commitment to a 2% inflation rate, saying:
“The Committee decided at today’s meeting to maintain the target range for the federal funds rate at 5-1/4 to 5-1/2 percent. And to continue the process of significantly reducing our securities holdings. As labor market tightens its ease and progress on inflation has continued, the risks to achieving our employment and inflation goals are coming into better balance. We believe that our policy rate is likely at its peak for this tightening cycle. In that, if the economy evolves broadly as expected, it will likely be appropriate to begin dialing back the policy restraint at some point this year. The economic outlook is uncertain however and we remain highly attentive to inflation risks. We are prepared to maintain the current target range for the federal funds rate for longer if appropriate.”

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Nevertheless, the market priced in the expectations of a June rate cut is the most likely upcoming initial rate adjustment with rates holding steady through the May meeting. This optimism was in large part due to the update in the Dot Plot which showed a concentration of members anticipating the target range to end around the 4.5% level by the end of 2024. This paints the picture of three 25 basis point rate cuts by the end of 2024 with additional cuts next year.
The yield curve dropped in response to this sentiment with the greatest pullback in the intermediate term of the curve.
https://www.federalreserve.gov/newsevents/pressreleases/monetary20240320a.htm
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