The recent meeting of the Federal Open Market Committee (FOMC), held on May 1, 2024, maintained the current interest rates, consistent with the previous five meetings. The committee acknowledged a stagnation in progress towards the Federal Reserve's inflation target, expressing the need for greater confidence before considering a rate reduction.
Highlighting the economy's resilience, tight labor markets, and unexpected uptick in inflation during the first quarter of 2024, the FOMC Chair suggested the possibility of maintaining policy rates at restrictive levels for an extended duration compared to previous assumptions.
However, reassuringly, the FOMC Chair dismissed the likelihood of rate hikes, asserting that the current policy rates effectively supported the central bank's objectives. Additionally, the Fed announced a reduction in Quantitative Tightening from $60 billion to $25 billion per month, a move that garnered positive reactions in the Asian markets.
Confirming expectations, the FOMC indicated a delay in the easing cycle. During the press conference, the chairman omitted the previously suggested timeline for scaling back policy restraint this year. When queried about the applicability of the 75 basis points cut outlined in the dot-plot guidance, he cited modest progress in the first quarter of 2024, making it challenging to pinpoint the timing of the rate-cutting cycle precisely. Our revised assessment aligns with this stance, suggesting that another three to six months of consistent evidence of disinflation is necessary before considering easing measures
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