Notes from the Federal Reserve’s interest rate meeting: Don’t panic about inflation, interest rates will fall (2024.3)

Abstract

At this meeting, the Federal Reserve kept interest rates unchanged.

The meeting announced new economic forecasts and raised the GDP growth forecast for this year and Inflation Forecasts.

The dot plot changes are anxious, It is expected that interest rates will be cut three times in 2024 (10 members), and the future The number of interest rate cuts in two years also fell, but was in line with expectations.

Conference Powell reaffirmed that this cycleinterest rates have peaked, Confirmed that it is appropriate to initiate interest rate cuts this year.

CPI data in January and February did not change Powell's view on thedeinflation process optimistic attitude, he emphasized that the FOMC expected that the fall in inflation would not be smooth sailing (bumpy).

Regarding the strong performance of the job market, Powell appeared "unreserved" and emphasized thatStrong employment will not affect the decision to cut interest rates.

Regarding the first rise in long-term interest rate forecasts in the past five years, Powell stated that he "doesn't know where the specific level is" butdoes not It will be as low as before the epidemic.

For QT Taper, the Fed has begun discussing balance sheet structural issues, with Powell emphasizing thedistribution of liquidity ”Question.

From a visual point of view, this meeting showed almost no hawkish signals. The two concerns that the market was worried about before the meeting were: Sub-inflation risks have not entered the FOMC's view.

The author believes that the "risk management" and " laid down by the Federal Reserve at its annual meeting The posture of "balancing risks" appeared biased at this meeting, downplaying the risk of inflation and deepening optimistic expectations for growth.

Risk assets continued to rise, the 10-year U.S. bond yield fell after rising, and the dollar fell.

Statement of the original text (only the first paragraph has negligible minor changes)

Recent indicators suggest that economic activity has been expanding at a solid pace. Job gains have remained strong, and the unemployment rate has remained low. Inflation has eased over the past year but remains elevated.

Recent indicators suggest economic activity is expanding at a solid pace. Job growth remains strong and unemployment remains low. Inflation has slowed over the past year but remains stubbornly high.

The Committee seeks to achieve maximum employment and inflation at the rate of 2 percent over the longer run. The Committee judges that the risks to achieving its employment and inflation goals are moving into better balance. The economic outlook is uncertain, and the Committee remains highly attentive to inflation risks.

The Committee is committed to achieving full employment and 2 % inflation rate. The Committee believes that risks to achieving the employment and inflation objectives are moving toward a better balance. The economic outlook is uncertain, and the Committee remains highly concerned about inflation risks.

In support of its goals, the Committee decided to maintain the target range for the federal funds rate at 5-1/4 to 5-1/2 percent. 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. The Committee does not expect it will be appropriate to reduce the target range until it has gained greater confidence that inflation is moving sustainably toward 2 percent. In addition, the Committee will continue reducing its holdings of Treasury securities and agency debt and agency mortgage-backed securities, as described in its previously announced plans. The Committee is strongly committed to returning inflation to its 2 percent objective.

To support its objective, the Committee decided to maintain the target range for the federal funds rate between 5.25% and 5.5%. In considering any changes to the target range for the federal funds rate, the Committee will carefully evaluate the latest data, the evolving outlook, and the balance of risks. The Committee expects that lowering the target range will not be appropriate until greater confidence is gained that inflation is moving toward sustainable growth of 2 percent. Additionally, the Committee will continue to reduce its holdings of Treasury securities, agency debt, and agency mortgage-backed securities in accordance with its previously announced plan. The Committee remains firmly committed to returning inflation to its 2% target.

In assessing the appropriate stance of monetary policy, the Committee will continue to monitor the implications of incoming information for the economic outlook. The Committee would be prepared to adjust the stance of monetary policy as appropriate if risks emerge that could impede the attainment of the Committee's goals. The Committee's assessments will take into account a wide range of information, including readings on labor market conditions, inflation pressures and inflation expectations, and financial and international developments .

The Committee will continue to monitor relevant information about the economic outlook as it evaluates the appropriate stance of monetary policy. The Committee will be prepared to adjust the stance of monetary policy as appropriate if risks arise that may impede the achievement of the Committee's objectives. The Committee's assessment will take into account a wide range of information, including labor market conditions, inflationary pressures and inflation expectations, and financial and international developments.

Dot plot and economic forecast details

Economic forecastUpgraded, which is almost the same as Goldman Sachs (optimistic) forecast p>

The inflation forecast has been slightly raised, reflecting that de-inflation is not an easy road.

Long-term interest rate forecast increase slightly by 10bp, the first time since the epidemic.

Judging from the dot plot, there are actually 9 members who believe that interest rates will be cut within two times, while those who believe that interest rates will be cut more than twice is ranked 10th, there is a risk of further reductions in the number of interest rate cuts.