In its latest meeting, the Federal Reserve has opted to hold the federal funds rate steady at 5.25-5.5%, indicating a single rate cut before the end of 2024. Despite inflation easing to 3.3% in May, the Fed’s Chair Jerome Powell has stated that the central bank requires more evidence of sustained progress towards the 2% inflation target before considering further rate reductions. This stance suggests a long-term commitment to combating inflation, with the long-run interest rate now projected at 2.8% and four rate cuts each anticipated in 2025 and 2026 after this year’s adjustment. The markets have reacted with a mix of optimism and caution to the Fed’s announcements. While stocks have seen a rally, with the S&P 500 and Nasdaq climbing, the dollar has experienced a decline. The crypto market, on the other hand, has shown significant responsiveness to the inflation data with Bitcoin reaching $69,100. However, the Fed’s cautious outlook has tempered some of the enthusiasm, dampening the momentum of the Bitcoin rally. The Fed’s decision has also sparked concerns in the commercial real estate sector, where players are facing a tough financing environment and have been advocating for rate cuts. The Fed’s commitment to a conservative policy approach is seen as a balancing act between ensuring economic stability and addressing the risk of inflationary pressures. As the Fed continues to monitor economic indicators, the market remains attentive to any signs that might suggest a shift in monetary policy.
Key points
- Federal Reserve maintains federal funds rate at 5.
- Inflation shows modest decrease to 3.
- Fed’s long-term rate projection set at 2.
- Stock markets rally, but the dollar falls following the Fed’s announcement.
- Crypto market reacts to inflation data, with Bitcoin reaching $69,100 before losing some steam.
25-5.
5%, projecting only one rate cut in 2024.
3% in May, but Fed requires more evidence of sustained progress towards 2% target.
8%, with eight rate cuts planned between 2025 and 2026.
Contradictions👾While the Fed signals conservative future rate cuts, market optimism suggests expectations of more aggressive cuts.
