Today, the Federal Reserve has made a resolute decision: it will maintain current interest rates and refrain from any immediate rate hikes. This announcement underscores the Fed's dedication to fostering financial stability in the face of persistent inflation concerns. 

Economic Activity and Inflation

Recent economic indicators have depicted a solid expansion in economic activity, underpinned by a robust job market and a persistently low unemployment rate. However, there has been a notable deceleration in job gains over recent months, although they remain strong. Furthermore, inflation continues to be a point of concern, with prices remaining elevated.

Monetary Policy and Federal Funds Rate

In light of its dual mandate to achieve maximum employment and maintain inflation at 2% over the long term, the Federal Reserve's Federal Open Market Committee (FOMC) has decided to keep the target range for the federal funds rate steady at 5-¼% to 5-½%. This decision reflects the Fed's commitment to addressing inflation while supporting economic growth. The FOMC has also affirmed its dedication to returning inflation to its objective of 2%.

Since March 2022, the Federal Reserve has increased its benchmark borrowing rate 11 times in a bid to manage the economy. This move has had a noticeable impact on consumers, as savings and loan yields have risen.

Possibility of a Soft Landing

While addressing questions from reporters, Fed Chair Jerome Powell acknowledged that a soft landing was not the "baseline expectation," but he emphasized that it remained a plausible outcome. Powell noted the challenges in navigating the uncertain economic landscape and underscored the Fed's commitment to carefully managing the situation.

Powell stated, "Ultimately this may be decided by factors outside of our control at the end of the day, but I do think it's possible. We will restore price stability, and we know we have to do that, and we know that the public depends on us doing that."

Future Outlook

The Federal Reserve's decision to maintain the federal funds rate at its current level reflects its strategy to strike a balance between economic growth and addressing inflationary pressures.

If you have any questions about today’s Market Update, you can call us at 604-643-0101 or email cashgroup@cgf.com.