The Federal Reserve ended their two-day meeting on Wednesday, March 20, in their standard form with a Press conference by Chair Powell. His language was guarded as usual but did point to what I would call an optimistic outlook of the Fed Funds borrowing** rate within the 2024 fiscal year. The overall sentiment seemed positive.

He pointed to the acronym soup (CPI, PPI, PCE, etc…) showing higher numbers than hoped could be bumps in the road, they are not yet signs of problems. The Fed governors would need to see multiple months in a row of higher-than-expected numbers before they would change the policy stance. Their overall policy stance still points to three 0.25% rate reductions within the calendar year** (See the dot plot below) this is with an expectation by the Fed of the inflation rate ending 2024 at around 2.6% which is a healthy expectation as it would likely take something catastrophic to get to 2% flat.

**The Federal Funds rate serves as a benchmark for short-term interest rates, influencing the cost at which banks lend money to each other overnight. Changes in the Fed Funds rate can indirectly impact mortgage rates by affecting the overall interest rate environment, influencing borrowing costs for banks and subsequently impacting the rates they offer to consumers on mortgages.**

Key Highlights:

Clarity in the Fed?

The Fed on March 20th, our best scenario for the meeting is no change in policy language with a slight leaning toward cuts at some point this year – ACHIEVED.
Will they continue to shed their balance sheet lowering their holdings, if we hear that they may begin to taper their reductions that may help us as well – ACHIEVED.
I wouldn’t say we are out of the woods yet, but this meeting was better than it could have been, language seems unchanged on the state of the market and the direction of the Federal Funds rate.
Remember, recessions are called in arrears meaning we could already be in one or coming into one, but we may not know quite yet.

Fed Dot Plot

Currently, we are at 5.25%-5.50%. This chart points to good moves yet to happen in 2024 and more in 2025 and 2026 (data dependent of course)

Screenshot 2024 04 10 At 13 22 37 Blog 1 March 20 2024

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