When Will The Fed Make It's First Move?

When Will The Fed Make It's First Move?

April 09, 2024

At the most recent Federal Open Market Committee meeting, Chairman Jerome Powell continued with language around a wait-and-see approach as they held rates steady for a 5th consecutive meeting.  A majority of Fed policymakers continue to believe there will be 3 rate cuts by the end of the year but the looming question remains: When will the Federal Reserve make its first move?

Today's hotter than expected inflation reading certainly doesn't make the case for soon but rather later. Recent trends among economists suggest a leaning towards a decision later in 2024, as indicated in the accompanying table.

Consumer inflation has steadily decreased from the highs we saw during the pandemic, though it remains above the Federal Reserve's 2% target. Gross domestic product maintains a positive trajectory, with the Atlanta Fed's GDPNow forecasting a 2.1% growth for Q1. Furthermore, the addition of 275,000 jobs in February indicates ongoing hiring by companies. Collectively, these indicators signal that the US economy continues to stand on a stable ground.

Additionally US equity prices are off to a solid start to the year, up slightly over 10% (S&P500) through March 31st as companies continue to generate profits.  For Q1 2024, the estimated (year-over-year) earnings growth rate for the S&P 500 is 3.2%. If 3.2% is the actual growth rate for the quarter, it will mark the third-straight quarter of year-over-year earnings growth for the index. 

The continued economic strength along with equity price momentum allows the Federal Reserve the time it needs to make a more informed decision on when to change interest rate policy.  Despite the speculation surrounding the timing of the Federal Reserve's actions, it's imperative to zoom out and consider the broader implications. This shouldn't prompt a reassessment of your investment strategy and it's crucial to bear in mind that your investment approach should be crafted to align with your specific goals, time horizon, and risk tolerance. Unless there have been significant shifts in any of these factors, it's advisable to maintain the current course of action.

About Rocklin Senavinin, CFP®

With over 20 years of experience in the financial planning industry, Roc has dedicated his career to helping individuals live comfortably in retirement and enjoy the assets they have spent their career building. He is co-founder of Fiduciary Wealth Management, a fee-only registered investment advisory firm in Little Rock, Arkansas. As a CERTIFIED FINANCIAL PLANNER™ professional, he has advanced training in the holistic process of creating a personal financial plan that addresses a person’s comprehensive needs for the short and long term. To learn more, connect with Roc on LinkedIn or visit www.fidwm.com. If you have questions, feel free to schedule a phone call using this link.


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