Federal reserve statement.

Federal Reserve Statement Explained – June 2024

June 13, 2024 3-minute read

Author: Kevin Graham

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The Federal Open Market Committee of the Federal Reserve chose to leave the federal funds rate target where it is for another meeting. That’s not the headline of this meeting though. You see, once every 3 months, the Fed releases projections as to where they think things are headed in the near- and medium-term future.

Based on the projections, it looks like there may be one decrease in the target by the end of the year. But nothing is guaranteed and now is likely the time the most inventory is available because you’re in the height of buying season. Ultimately, though, you have to apply for a mortgage when the time is right for you.

My analysis is labeled and in bold below.

Recent indicators suggest that economic activity has continued to expand 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. In recent months, there has been modest further progress toward the Committee's 2 percent inflation objective.

Commentary: This paragraph is like the dashboard on your car. There have been jobs added and the unemployment rate is low, so we’re good on gas and oil. Inflation is running a little hotter than we would like. Maybe it’s time to invest in fixing the air conditioner. But we’re getting there.

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 have moved toward better balance over the past year. The economic outlook is uncertain, and the Committee remains highly attentive to inflation risks.

Commentary: The Committee is saying that it thinks the risks between inflation and employment are getting closer to a 50-50 split. The Fed has a dual mandate to create the conditions that support maximum employment while also keeping prices stable. This is a shift because everything has been focused on inflation recently.

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. The Committee is strongly committed to returning inflation to its 2 percent objective.

Commentary: The Federal Reserve is maintaining the federal funds rate where it is right now. The federal funds rate is important because it impacts rates across consumer finance, including for mortgages. If you like the rate you see, and you’re in the market for a mortgage, stability is good.

There’s some other stuff in here about the Federal Reserve runoff of U.S. treasuries as well as agency mortgage-backed securities. As the Federal Reserve sells off mortgage bonds, that would tend to drive rates higher because you need to find another buyer and they’re likely to want a higher yield.

The good news is nothing has changed about those plans or the pace at which they’re doing it. This is already contemplated in rates, and they shouldn’t be moving higher on that alone.

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: The Committee always points out the information it looks at in making decisions. A lot of this has to do with inflation, but I would say that to the extent the economy cools, employment and other labor data always become a bigger focus. So the pendulum swings.

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: All voting members were in agreement.

Kevin

Kevin Graham

Kevin Graham is a Senior Blog Writer for Rocket Companies. He specializes in economics, mortgage qualification and personal finance topics. As someone with cerebral palsy spastic quadriplegia that requires the use of a wheelchair, he also takes on articles around modifying your home for physical challenges and smart home tech. Kevin has a BA in Journalism from Oakland University. Prior to joining Rocket Mortgage, he freelanced for various newspapers in the Metro Detroit area.