UPDATE ON THE FEDERAL RESERVE & FED FUNDS RATE

As I've discussed, the market has been anticipating more rate cuts in 2024 than the Fed, which has fueled recent optimism about asset prices. 🤑 This optimism persists despite inflation measures being stickier than expected and the economy holding up better than anticipated, factors that could lead the Fed to maintain higher rates for longer.

Today, the Federal Reserve announced its rate decision, keeping rates unchanged as expected. However, there was a notable shift in the "dots" (economic projections), which influenced market movements. 🔍

In the table below, we can see that the Fed's projections for growth and the median Fed Funds rate in 2025 and 2026 both increased. This indicates their expectation for stronger growth than previously thought, suggesting that rates may need to be slightly higher than initially anticipated.

Despite this, Powell's projections and commentary suggest that three rate cuts are still on the table for 2024. For now, given the strength of employment and earnings, this seems to be enough for markets to rally.
 
The Fed may not be pleased with the market's reaction, as strong asset prices can contribute to inflationary pressures. Nevertheless, this is the current trend, and only time will reveal whether the Fed or investors have misjudged.