Federal Reserve Meeting Recap Chair Powell and FOMC Maintain Status Quo with Unchanged Key Rates at 5.25-5.50% for the Fourth Consecutive Meeting.
3 min read 2024-02-01, 06:30 PM IST
Summary
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The US Federal Reserve, in its latest decision following a two-day Federal Open Market Committee (FOMC) meeting, has opted to keep benchmark interest rates unchanged at 5.25% to 5.50%. This marks the fourth consecutive meeting where the rates have remained stable, aligning with expectations on Wall Street.
The conclusion of the first policy-setting meeting of the year saw unanimous agreement among the FOMC members to maintain the policy rate at its 23-year high. However, the Federal Reserve acknowledged that it is not yet considering a reduction in the target range until there is increased confidence that inflation is moving sustainably towards the two percent target.
While emphasizing that inflation has moderated over the past year, the central bank emphasized its continued vigilance regarding inflation risks. The FOMC statement noted that the “risks to achieving its employment and inflation goals are moving into better balance,” signaling a shift from the previous stance, which had been biased towards raising rates due to concerns about escalating prices.
In its communication, the Fed indicated that it remains highly attentive to inflation risks, acknowledging the persistence of elevated inflation levels. This decision follows the central bank’s pattern of keeping the policy rate steady since July after implementing swift rate hikes totaling 5.25 percentage points in response to mounting inflation pressures since March 2022.
The statement issued by the Fed departed from the one released in December 2023, which outlined conditions for considering “any additional policy firming.” Notably, this language excluded any contemplation of rate cuts, disappointing investors who had anticipated potential rate reductions starting as early as March.
The market reaction to the decision was swift. The US dollar rebounded against the euro and trimmed losses against the yen after Federal Reserve Chair Jerome Powell stated that a rate cut in March was not the central bank’s “base case.” Powell’s less dovish outlook on rates, contrary to market expectations, prompted a 0.26% increase in the dollar index to 103.66, marking the best month for the index since September with a 2.3% gain.
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In the wake of Powell’s comments, gold prices experienced a reversal. The precious metal, which had initially risen by up to one percent, edged lower after Powell firmly pushed back against expectations of a US rate cut by March. Spot gold dipped 0.1% to $2,034.37 per ounce, with bullion down 1.3% for the month but still holding above the psychologically significant $2,000 per ounce level. US gold futures settled 0.8% higher at $2,067.4.
Investors and market participants are advised to stay tuned for further updates on the FOMC meeting outcome. The decision and subsequent market reactions underscore the critical role of central bank communications in influencing global financial markets.
Live Updates
- 01 Feb 2024, 02:11:31 AM IST US Fed Meet Live: Dollar rebounds as Fed’s Powell sees March rate cut as unlikely. The dollar gained on the euro and pared losses against the yen after Federal Reserve Chair Jerome Powell said that a rate cut in March was not the US central bank’s “base case.” The dollar index was last up 0.26% on the day at 103.66, on track for a 2.3% gain this month, the best month since September.
- 01 Feb 2024, 02:11:31 AM IST US Fed Meet Live: Gold drifts lower after Powell pushes back prospect of March rate cut. Gold prices reversed course and edged lower after Federal Reserve Chair Jerome Powell pushed back strongly against expectations of a US rate cut by March. Spot gold eased 0.1% at $2,034.37 per ounce after rising as much as one percent earlier in the session. Bullion was down 1.3% this month but has held above the $2,000 per ounce psychological level so far this year. US gold futures settled 0.8% higher at $2,067.4, according to news agency Reuters.
The outcomes of the FOMC meeting and subsequent market developments highlight the delicate balance central banks must strike in managing inflationary pressures while considering the potential impact on various asset classes. Powell’s remarks provide insights into the Fed’s cautious approach and its ongoing commitment to addressing inflation concerns in the current economic landscape.
