That allows producers and service providers to raise prices without worrying about a significant loss in sales. Inflation is a generalized rise in prices, affecting different goods and services throughout the economy, such as gas, rent and food. The Fed reported that the American economy remains strong and the labor market resilient–but also acknowledged that the pace of growth had slowed down compared to 2023. During the most recent FOMC meeting held on July 30-31, 2024, interest rates were kept unchanged at 5.25%-5.50%. Taylor Tepper is a senior writer at Forbes Advisor, focusing on saving and spending behavior.
Meeting calendars, statements, and minutes (2019-
The FOMC issues a statement after each meeting summarizing its assessment of the economy and policy decisions. The statement also includes an implementation note providing operational details on how the policy decision will be carried out. The FOMC also publishes its Summary of Economic Projections (SEP) four times a year, showing the members’ forecasts for key economic variables over the next three years and their views on the appropriate path of the federal funds rate. The FOMC serves as the monetary policy-making arm of the Federal Reserve System, and its decisions have far-reaching implications for the U.S. economy.
- Between the Spring of 2022 and the Summer of 2023, the Fed raised the federal funds rate from nearly zero to between 5.25% and 5.50%.
- From the Craig Newmark Graduate School of Journalism at the City University of New York where he focused on business reporting and was awarded the Frederic Wiegold Prize for Business Journalism.
- It has since held rates unchanged, allowing the economy time to absorb higher borrowing rates without falling into a recession, a so-called soft landing.
- It showed that overall prices in April eased from a 40-year high while remaining elevated.
Here’s The Fed’s 2024 Meeting Schedule And Interest Rate Outlook
Of course, this will all depend on the trajectory of inflation and the state of the economy. The Fed’s policy moves ultimately depend on what economic data show in the coming weeks, including measures of inflation, employment, and productivity. The Fed will also monitor credit conditions, the financial markets, and global developments closely. Overall, interest rates, as set by the Fed, are expected to move down in 2024 in neither rapid nor dramatic fashion. A severe recession, which is also not expected, might equally prompt the Fed to cut rates at a faster pace.
What To Expect
If you strip out volatile food and energy prices (so-called core PCE) prices were up 2.6% compared to 2.8% in April. Take the personal consumption expenditures price index (PCE), which is published monthly by the Bureau of Economic Analysis. It showed that prices are up 2.5% from a month ago, which is a few ticks down from where it stood in April. While the economy is humming along, inflation continues to grind toward the Fed’s preferred target of 2%.
The Fed had raised rates almost a dozen times since early 2022-’23 to cool the U.S. economy and battle inflation rates that peaked at more than 9% last year. The Fed’s rate-hiking campaign has been the most aggressive since the 1980s, and it sparked some turmoil in the banking sector, the stock market, and the global economy. However, rates at around 5.50% are still less than half of their 1980s peak. The Fed has held rates steady at 5.25%-5.50% already for several months, which has provided some relief for a strained banking sector and stock market. Experts predict that the Fed will shift to rate cuts—although the extent to which they do will depend on economic conditions in the coming weeks and months.
The Federal Open Market Committee (FOMC) is the monetary policy-making body of the Federal Reserve System, the central bank of the United States. The FOMC holds eight regularly scheduled meetings during the year and may hold other meetings as needed to set emergency short-term interest rates or implement other policy tools. Another key trend is hiring, which accelerated in May as employers added a booming 339,000 jobs, much more than economists expected. It was another sign that the job market has been remarkably sturdy despite the Fed’s aggressive hikes aimed at tamping down hiring and wage growth, a key driver of inflation. The FOMC holds eight regularly scheduled meetings during the year and other meetings as needed.
Every other meeting (for 2024, it’s March, June, September and December) will be accompanied by a Summary of Economic Projections. Here policymakers document their expectations for interest rates, growth, unemployment and inflation for the coming years and the longer run. Whenever the Fed does raise rates, it’ll mark the turning of the tide on its hawkish policy following the onslaught of higher prices caused by the economic lockdowns and stimulus spending of the Covid era. The Fed is the nation’s central bank, leaving it in charge of monetary policy.
Up to now, Fed officials have also argued that rates could increase again from here. That scenario is now being described more as a potential outcome under certain economic conditions than the base case for interest rates. The Federal Reserve is expected to ultimately cut interest rates in 2024, but in a measured way and with action weighted toward the second half. Markets expect that to fall by approximately 1% by the end of 2024 — as assessed by the CME FedWatch Tool, which measures the implied expectations of the debt markets. The current range of outcomes for rates suggests a likely figure between 4% and 5% for short-term rates by December 2024.
The economy grew at a robust annual rate of 2.8% between April and June, according to the Commerce Department, which was better than analyst expectations and well above the 1.4% clip for the first three months of 2024. From “What is inflation?” to “What is a recession?” to “How to enroll in Zelle?” – we’re striving to find answers to the most common questions you ask every day. Earlier this month, Federal Reserve Chair Jerome Powell told Congress, “I’m today not going to be sending any signal about the timing of future action,” regarding lower interest rates. Adam Hayes, Ph.D., CFA, is a financial writer with 15+ years Wall Street experience as a derivatives trader. Besides his extensive derivative trading expertise, Adam is an expert in economics and behavioral finance.
Meeting eight times a year, and occasionally more if the situation demands, the FOMC deliberates on the nation’s interest rates and other financial policies. These decisions influence everything from the rates you get on your savings account to the cost of borrowing for homes and businesses. The Fed’s decisions and statements have important implications for investors, as they affect the cost of borrowing, the value of assets, and the strength of the U.S. dollar. Investors and analysts pay close attention to the Fed’s announcements and actions, as those can have a significant impact on market conditions, which affect their portfolios, strategies, and recommendations.
The trick is to moderate inflation without sending the economy into a recession, what economists call a “soft landing.” After raising its key interest rate for nearly two years to tamp down growth and rising prices, economists expected the Fed to cut the rate to bring it more in line with slowing inflation. However, estimates have been scaled back with most rate cut predictions shifting to two, one or none after inflation accelerated early this year. However, Fed policymakers will update those projections at their next interest rate decision on December 1 when rates are expected to be held steady.
The Fed’s policy moves depend on what economic indicators, including the Consumer Price Index (CPI), payrolls, and gross domestic product (GDP) growth, indicate for the coming weeks and months. Of course, price growth remains above the Fed’s 2%, which is why it has been cautious in cutting rates. Should inflation remain higher than where the Fed wants it to be, it’ll likely not cut rates as quickly as some market participants expect. The Fed lifts rates to raise the cost of borrowing for businesses and shoppers. The goal is to curb borrowing, cool off an overheated economy and fend off inflation spikes.
The current narrative is the inflation is cooling and on track to return to the Fed’s 2% annual target over the medium term. It has asserted that rates may increase again if inflation does not move progressively lower. The FOMC chair typically holds a press conference after four of the eight meetings each year, where the chair explains the policy decision and answers questions from journalists. A weaker job market was the point of the Fed increasing rates so dramatically after inflation proved to be more permanent than transitory.
The jobs market has remained robust to date, but jobs gains have slowed from high levels and could weaken further in 2024. There is some suggestion that with the yield curve flashing a recession warning and unemployment edging up, a 2024 recession may be coming. Each decision will be announced on the Fed’s website via a written statement at 2 p.m. The FOMC meetings are closed to the public but are recorded and transcribed. The minutes of each meeting are released three weeks after the date of the policy decision. That blockbuster May jobs report could scuttle the Fed’s plan to pause rate hikes this week.
The unemployment rate in June 2024 was 4.1%, half a percentage point higher than a year before. Folks are less likely to quit their jobs (in hopes of finding a better one) and job openings have declined substantially. “Inflation continues to moderate and is slowly approaching the Fed’s target,” said Jeffrey Roach, chief economist for LPL Financial. And the good times might keep rolling; the Atlanta Fed’s GDP Now tool expects the economy to grow by another 2.8% in the third quarter of the year. Consumers are continuing to spend, even as wage growth declines and prices are elevated above pre-pandemic levels.
To control inflation, one of the Fed’s main tools is the federal funds rate, which is the rate banks charge each other for overnight loans. For now, the Fed has argued its goal is to maintain high rates for some time to manage inflation. Still, there is a potential scenario where a severe recession prompts the Fed to cut rates faster than planned. However, markets have increasingly taken the position over recent weeks that inflation is controlled and no more interest rate increases are coming. That’s not entirely at odds with the Fed’s perspective, but Fed officials still express some concern that inflation may not move consistently lower from here.