Federal Reserve Holds Steady: Insights and Market Reactions

Anderson Wozny |

With last week's Federal Reserve (Fed) meeting out of the way, it’s naturally time to share a quick update with you.

As anticipated, the Fed maintained interest rates at their current levels during its March policy meeting.[i] What really seemed to have caught the attention of investors was Federal Reserve Chair Jerome Powell's remarks during the Q&A session, where he suggested potential rate cuts later this year. This outlook apparently helped spur buying which you can see from this chart of the S&P 500.

Source: Bloomberg

For the week, the S&P 500 rose by 2.29%, the Nasdaq 100 tacked on 2.98%, and the Dow Jones Industrial Average increased by 1.97%.

Fed: Rates Unchanged, Focus on Inflation

True to expectations, the Fed opted to keep rates stable at last week's policy gathering. Powell's commentary also leaned toward a dovish stance regarding future interest rate policies.

Powell emphasized the Fed's commitment to ensuring inflation readings move closer to the 2% target. Despite recent spikes in inflation, the Fed aims to ascertain sustained progress towards this goal, particularly given the variability of inflation data over the past year.[ii]

Three Rate Cuts Projected for 2024

The Fed's “dot plot,”[iii] aggregating insights from 19 FOMC officials, indicated a projection of three quarter-point rate cuts for 2024. With only six policy meetings left this year, the timing of these anticipated cuts remains a subject of speculation. Whether forthcoming inflation data aligns with these projections is a key question on investors' minds.

Home Sales Rebound

February witnessed a robust rebound in existing home sales, marking a 9.5%[iv] increase from the previous month. Although this surge reflects a notable recovery, sales figures remain lower compared to the same period last year. Encouragingly, buyers seem more responsive to mortgage rates near current levels, fostering improved market conditions compared to previous months.

Crypto Market Recap

Major cryptocurrencies experienced a pullback from recent highs, with Bitcoin retreating around 4.92% for the week. Despite this dip, cryptocurrencies continue to attract attention, with discussions revolving around the potential introduction of an Ethereum ETF.

Week in Review

The past week saw U.S. stock indexes maintaining their push towards higher prices, breaking out of a brief consolidation phase.

Source: Bloomberg

Inflation concerns persist amidst elevated interest rates, underscoring the importance of long-term investing strategies to weather market fluctuations.

Looking Ahead

Market watchers await Friday's Core Personal Consumption Expenditures (PCE) reading, which is a gauge of inflation trends. As we navigate evolving market conditions, remember that I'm here to provide support and discuss your investment strategy at any time.

Wishing you a fantastic week ahead, and don't hesitate to reach out if you have any questions or need assistance.


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