As expected, the FOMC made no change to the fed funds rate target at the March 19-20 deliberations and very little change to its policy announcement. The only tweak in the language is concerning job gains which"remained strong" relative to the January assessment and which removes the January reference to moderation relative to 2023. The unemployment rate continues to be deemed"low" and inflation"eased over the past year but remains elevated." Growth continues"at a solid pace."

The statement also retains the prior assessment of risk. It said,"The economic outlook is uncertain, and the Committee remains highly attentive to inflation risks."

Altogether, the statement would suggest that the FOMC is taking the recent less favorable inflation numbers in stride. The quarterly update to the summary of economic projections (SEP) is not much changed in regard to inflation. Inflation projections put it at 2.4 percent for 2024 which is unchanged from the prior forecast, although forecasts expected slightly higher inflation of 2.2 percent in 2025 from 2.1 percent in the prior forecast, while inflation in 2026 has an unrevised forecast of 2.0 percent. Core inflation forecasts are up a bit to 2.6 percent for 2024 after 2.4 percent in the previous forecast, while forecasts for 2025 and 2026 are unrevised at 2.2 percent and 2.0 percent, respectively.

Importantly, the SEP shows that the longer-run expectation for the mid-point of the fed funds target rate range is up a tenth to 2.6 percent after 2.5 percent which has predominated since 2.4 percent in the March 2022 forecast. It's a small move, but significant in that it is moving higher and supports slightly more restrictive monetary policy. The median forecast for the mid-point of the fed funds target range remains at 4.6 percent for 2024. However, the mid-point for 2025 is revised up 3 tenths to 3.9 percent and for 2026 up 2 tenths to 3.1 percent. This will be a disappointment to those looking for lower rates in the next two or three years. The FOMC anticipates rates will continue to come down, but more slowly than previously forecast.

Forecasts for the unemployment rate are very little revised. The rate for 2024 is expected to be at 4.0 percent, down slightly from the prior forecast of 4.1 percent. The forecast for 2025 is unrevised at 4.1 percent, and revised a tick lower to 4.0 percent in 2026 after 4.1 percent in the prior forecast.

The one big change in the summary of forecasts is that expectations for the change in real GDP are up to 2.1 percent for 2024 after 1.4 percent in the December forecast. The forecasts for GDP in 2025 and 2026 are revised up 2 tenths each to up 2.0 percent in both years.

The Fed is once again expected keep policy unchanged. The jobs market remains tight and strong while inflation remains too high.

The FOMC meeting announcement is a policy statement issued at the conclusion of each meeting of the Federal Open Market Committee. It offers updates on economic conditions with special focus on the health of the labor market and the latest on inflation. It also updates the status of the federal funds target which is the FOMC's official policy interest rate. This rate is expressed within a range, such as 1.75 to 2.00 percent. The center of this range is the implied target. The higher this target, the more restrictive monetary policy becomes, the lower this target, the more accommodative policy becomes. Other policy tools are also discussed in the meeting announcement including updates on direct purchases of Treasuries and mortgage-backed securities. Debate is not offered in the statement, just the consensus view is expressed, though the statement does list the total committee vote and how each member voted.

The Fed determines interest rate policy at FOMC meetings. These occur roughly every six weeks and are the single most influential event for the markets. For weeks in advance, market participants speculate about the possibility of an interest rate change at these meetings. If the outcome is different from expectations, the impact on the markets can be dramatic and far-reaching.

The interest rate set by the Fed, the federal funds rate, serves as a benchmark for all other rates. A change in the fed funds rate, the lending rate banks charge each other for the use of overnight funds, translates directly through to all other interest rates from Treasury bonds to mortgage loans. It also changes the dynamics of competition for investor dollars. When bonds yield 5 percent, they will attract more money away from stocks than when they only yield 3 percent.

The level of interest rates affects the economy. Higher interest rates tend to slow economic activity; lower interest rates stimulate economic activity. Either way, interest rates influence the sales environment. In the consumer sector, fewer homes or cars will be purchased when interest rates rise. Furthermore, interest rate costs are a significant factor for many businesses, particularly for companies with high debt loads or who have to finance high inventory levels. This interest cost has a direct impact on corporate profits. The bottom line is that higher interest rates are bearish for the stock market, while lower interest rates are bullish.

The Fed also began quantitative easing during the past recession and, through direct purchases in the market, steadily increased its holdings of Treasuries and mortgage-back securities before pulling back from the program beginning in late 2017. Along with lowering its bond holdings, the Fed began to gradually raise its federal funds target until mid-2019 when, facing slowing global growth, it began to lower its target.

Frequency
Eight times a year.