The Federal Reserve is expected to hold its ground as scheduled, and the dot matrix chart predicts three interest rate cuts this year

At the interest rate meeting that ended early Thursday in Beijing time, the Federal Reserve kept the federal funds rate range unchanged at 5.25% -5.5%, in line with expectations. Since July last year, the Federal Reserve has been keeping interest rates at this level.

The interest rate roadmap released together shows that Federal Reserve officials estimate to cut interest rates three times before the end of this year, but have not provided a specific timeline. If the Federal Reserve lowers its strategic interest rate this year, it will be the first rate cut since March 2020.
The resolution plan to maintain the key interest rate has lost unanimous approval from members of the Federal Open Market Committee. The strategy statement released by the Federal Reserve after the meeting remained almost unchanged compared to January, only changing the description of the increase in unemployment from “slowing” to “strong”. The statement reiterates that the committee believes that the target range for progress is not appropriate until it firmly believes that inflation continues to move towards 2%.
“We believe that the strategy interest rate can have reached the peak of this round of compression cycle. If the economy grows roughly as expected, it would be appropriate to start tightening the strategy limit at some point this year,” Federal Reserve President Jerome Powell said at the post meeting press conference. But he also pointed out that if necessary, the target range of the federal funds rate will be maintained at its current level for a longer period of time.
When asked if the Federal Reserve could cut interest rates at a rally in May or June, Powell avoided this achievement and only reiterated that the first rate cut could be “at some point this year.”.
The federal funds rate is the overnight interest rate used by deposit based financial institutions in the United States for unsecured loans, while also affecting other fraudulent loan costs of the entire economy, such as collateralized deposits, credit cards, and trade deposits. Since March 2022, the Federal Reserve has raised the federal funds rate range from near zero to a 23 year high of 5.25% -5.5% to curb a sharp drop in inflation.
Regarding the situation where inflation has exceeded expectations in the past two months, Powell stated that Federal Reserve officials had anticipated that improving inflation could be a “bumpy journey”. “We have been saying this, and now we have encountered it.” However, he exaggerated that recent data has not changed the overall growth trend of inflation, that is, price growth is slowing down, although there are some twists and turns.
At the same time, he stated that these data also support the cautious stance of the Federal Reserve towards the first rate cut, as decision planners are still exploring more empirical evidence that inflation is moving towards its goals.
The grid chart released on that day showed that Federal Reserve officials estimated that interest rates would be lowered three times in 2025, an increase from the expectation in December last year; It is estimated that interest rates will be cut three times in 2026, followed by two more cuts until the federal funds rate stabilizes at around 2.6%, close to what decision planners consider to be a “neutral” level.
The Federal Reserve has also significantly increased its expectations for economic growth in the United States this year, increasing GDP growth from an estimated 1.4% in December last year to 2.1%. At the same time, it has slightly lowered its unemployment rate forecast for this year from the previous 4.1% to 4.0%.
The latest unemployed complaints show that the US labor market has cooled down, but still remains resilient. The non-agricultural unemployment rate in February dropped to 3.9%, higher than expected and the previous value of 3.7%; The number of unemployed non-agricultural workers increased by 275000, higher than the expected 200000.
In terms of inflation, the resolution planners estimate that the Consumer Price Index (PCE) of the focus individual will increase by 2.6% in 2024, compared to the previous expectation of 2.4%. In January of this year, PCE increased by 2.85% year-on-year, the smallest increase since April 2021.
At the rally, the Federal Reserve also showed its plan to reduce the number of treasury bond bonds and pledged deposit bonds by no more than $95 billion per month. Powell revealed that this week Federal Reserve officials stopped discussing the results of compressing the balance sheet, and everyone believed that accelerating the pace of balance sheet reduction in the future would be appropriate. “This will help ensure a smooth transition and increase the ability of the cryptocurrency market to withstand pressure.”
Due to the fact that the dot matrix still estimates that interest rates will be lowered three times this year, all three major US stock indices have hit new highs in their opening. The Dow Jones Industrial Average rose 1.03% on Wednesday to 39512.13 points; The S&P 500 index rose 0.89% to close at 5224.62 points; The Nasdaq Composite Index rose 1.25% to close at 16369.41 points.