Federal Reserve Press Release In Plain English – March 2024

The Federal Reserve (Fed) didn’t change much in its statement, as the federal funds rate target range is flat at 5.25% – 5.5%. However, the Fed does release a summary of economic projections at the end of every quarter. For some, it’s one of the most wonderful four times of the year.

The thing economists and other financial analysts pay attention to when trying to read the minds of Fed officials is the projection for the federal funds rate moving forward.

The median projection officials see by the end of 2024 is unchanged at 4.6%. Given the current target range, that’s probably two or three rate cuts depending on how far they choose to go down with each movement. The inflation projections are a bit higher this time around than they were in December, so the Fed may choose to take things slowly.

No one knows for sure when rates will drop, but if you’re ready, it doesn’t hurt to lock your rate. It’s possible home prices might go up when rates drop based on sellers knowing people will be able to afford more at lower rates. Don’t try to time things. Lock when you’re ready.

You’ll find the Federal Reserve March statement below. My commentary is in bold.

Recent indicators suggest that economic activity has been expanding at a solid pace. Job gains have remained strong, and the unemployment rate has remained low. Inflation has eased over the past year but remains elevated.

Commentary: The job market is going full speed in the Fed’s assessment. Officials removed a reference to “moderating” employment numbers from last time. Jobs are one indicator for the Fed’s “soft landing” happy path, but officials would like to see inflation taper off.

The Committee seeks to achieve maximum employment and inflation at the rate of 2 percent over the longer run. The Committee judges that the risks to achieving its employment and inflation goals are moving into better balance. The economic outlook is uncertain, and the Committee remains highly attentive to inflation risks.

Commentary: The Fed is keeping an eye on its goal of getting inflation down to 2%. There’s nothing new here, but for those who don’t live on economics news, here’s why: 2% is just enough inflation to keep the economy going by encouraging people to buy now, but not so much as to seriously devalue money being saved.

In support of its goals, the Committee decided to maintain the target range for the federal funds rate at 5-1/4 to 5-1/2 percent. In considering any adjustments to the target range for the federal funds rate, the Committee will carefully assess incoming data, the evolving outlook, and the balance of risks. The Committee does not expect it will be appropriate to reduce the target range until it has gained greater confidence that inflation is moving sustainably toward 2 percent. In addition, the Committee will continue reducing its holdings of Treasury securities and agency debt and agency mortgage-backed securities, as described in its previously announced plans. The Committee is strongly committed to returning inflation to its 2 percent objective.

Commentary: The Fed left the target range for the federal funds rate unchanged between 5.25% – 5.5%. It’s worth noting that in the projections released along with this statement that we talked about above, the expectation for 2025 is an average federal funds rate of 4.6%. That would mean multiple rate cuts later this year.

Meanwhile, the Fed is also selling off the pandemic-related buildup it had in mortgage-backed securities (MBS). When the Fed is buying a lot of these, mortgage rates tend to be lower because the yield on the MBS needn’t be as high to attract buyers. The Fed selloff means other investors demanding higher rates.

In assessing the appropriate stance of monetary policy, the Committee will continue to monitor the implications of incoming information for the economic outlook. The Committee would be prepared to adjust the stance of monetary policy as appropriate if risks emerge that could impede the attainment of the Committee's goals. The Committee's assessments will take into account a wide range of information, including readings on labor market conditions, inflation pressures and inflation expectations, and financial and international developments.

Commentary: This is boilerplate. Officials are constantly monitoring incoming economic and geopolitical developments. They’re prepared to pivot policy in response to new developments as necessary. However, if forced to place a finger on the thing most important to them right now, it’s inflation and expectations.

Voting for the monetary policy action were Jerome H. Powell, Chair; John C. Williams, Vice Chair; Thomas I. Barkin; Michael S. Barr; Raphael W. Bostic; Michelle W. Bowman; Lisa D. Cook; Mary C. Daly; Philip N. Jefferson; Adriana D. Kugler; Loretta J. Mester; and Christopher J. Waller.

Commentary: Committee members were in agreement.