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On Wednesday, March 20, 2024, the Federal Open Market Committee (FOMC) declared that there will be no change to the federal funds rate for the time being. The committee emphasized its intention not to lower the target rate until there is “greater confidence that inflation is moving sustainably” toward the 2% target.

Fed Pauses Rate Changes, Awaiting ‘Greater Confidence’ on Inflation

The U.S. Federal Reserve has opted to maintain the federal funds rate at its present level of 5.25% to 5.5%. Initially, expectations leaned towards a rate cut in March 2024, but these anticipations have now been deferred to the June 2024 FOMC meeting.

The Fed’s update on Wednesday indicated that “in considering any adjustments to the target range for the federal funds rate, the committee will carefully assess incoming data, the evolving outlook, and the balance of risks.” Moreover, it underscored the necessity for Fed officials to achieve “greater confidence” that the nation’s inflation rate is progressing towards the 2% goal.

Contrastingly, inflation has persistently increased over the previous two months. The FOMC steadfastly maintains that the Fed is “strongly committed to returning inflation to its 2 percent objective.” In the interim, before and after the release of the FOMC report, major stock market indices have shown little movement, as investors awaited comments from Fed Chairman Jerome Powell.

The market responded to the announcement of a 75 basis points (bps) reduction in the dot plot for 2024, signaling that three rate cuts might be anticipated in the forthcoming months. This development has kept bond yields subdued while equities have enjoyed a favorable outlook. Similarly, bitcoin (BTC) and the broader crypto economy have shown minimal fluctuation following the Fed’s verdict. BTC saw a 1.6% increase, however, following Powell’s press statements. Likewise, the prices of gold and silver have remained steady.

“Inflation has eased substantially but still too high,” Powell told the press on Wednesday. He further noted that the “economy has made considerable progress.” The Fed chair added, “Ongoing progress not assured though, the path forward is uncertain.”

“Powell made sure to qualify the Fed’s commitment to bringing inflation back down to 2% by repeating that the target would be achieved ‘over time,’” the economist Peter Schiff said after the meeting. “However, he never clarified how much time. So if inflation eventually gets down to 2% in 20 years, the Fed will have delivered.”

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