No surprises

The much-anticipated Federal Reserve meeting has now come and gone, and what did the market learn? 

The meeting policy statement was nearly identical to that from the January 31 meeting, with the only wording difference in how the Fed assessed job gains (from job gains have moderated since early last year but remain strong, to job gains have remained strong). The fed funds rate was unchanged, at 5.25-5.5%, and the Fed does not see reducing it until it has gained greater confidence that inflation is moving sustainably toward 2%. 

In its summary of economic projections, the Fed continues to see three rate cuts in 2024, but one fewer in 2025, perhaps due to slightly higher economic growth in 2024 and 2025 than the Fed had seen in its December projection. Unemployment should be 4.0 to 4.1% this year and beyond, and inflation should slowly fall to 2.0% by year-end 2026.

Simply put, the Fed’s message calmed market anxiety after a couple months of inflation that came in a bit above expectations. Chair Powell acknowledged that inflation has been bumpy, but the Fed has expected that, and it remains committed to its 2% target. The Fed will be looking for more good data to support its desire to cut the fed funds rate.