US Fed Meeting Outcome Highlights: Powell-led FOMC holds key rates steady (2024)

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US Fed Meeting Outcome Highlights: Powell-led FOMC holds key rates steady? ›

Powell-led FOMC has sustained the key interest rates at the two-decade high-mark that it first reached in July 2023. However, Fed policymakers signaled they now expect to cut rates only once this year, compared to the three reductions forecast in March, according to the median projection.

The FOMC maintained its gross domestic product growth forecast for 2024, 2025, and 2026, while increasing slightly its unemployment expectation for 2025 and 2026. Upward revisions were evident in its headline and core inflation forecasts raising 2024 and 2025 estimates by 0.2% and 0.1%, respectively.

The central bank voted to keep its benchmark interest rate in a range of 5.25%-5.50% at the conclusion of its two-day policy meeting. The fed funds rate has been in this range since July 2023. It was a close call on the revised median of rate cuts predicted for this year.

The Federal Reserve announced at its May 2024 Federal Open Market Committee (FOMC) meeting that it would maintain the overnight federal funds rate at the current range of 5.25% to 5.5%.

The FOMC holds eight regularly scheduled meetings per year. At these meetings, the Committee reviews economic and financial conditions, determines the appropriate stance of monetary policy, and assesses the risks to its long-run goals of price stability and sustainable economic growth.

The FOMC raised interest rates 11 times from 2022 to 2023, putting the federal funds target rate at 5.25% to 5.50%. However, the Fed has not rasied rates since July 2023.

The Fed raises interest rates to slow the amount of money circulating through the economy and drive down aggregate demand. With higher interest rates, there will be lower demand for goods and services, and the prices for those goods and services should fall.

The Fed can shock rationally expected real interest rates, but only by taking policy actions other than the actions the public supposes they are taking. That is, if Fed policy on a particular day is known by the public on that day, it will have no effect on real rates.

This reflects an upward revision in Fannie's analysis: One month prior, the mortgage giant expected rates would fall to 6.4% by year-end, and just a few months ago, it forecasted rates would dip below 6% by the end of this year. All told, Fannie Mae predicts mortgage rates will average 7% in 2024 and 6.7% in 2025.

What was the Fed decision on May 1 2024? ›

The FOMC voted unanimously at the meeting to hold its benchmark short-term borrowing rate in a range of 5.25%-5.5%, a 23-year high where it has been since July 2023.

What does “FOMC” stand for? The Federal Open Market Committee, or FOMC, is the Fed's chief body for monetary policy.

The Federal Open Market Committee

For traders, FOMC meetings are a time of particular volatility because any change in federal fund rates can affect a range of economic variables such as short-term interest rates, foreign exchange rates, long-term interest rates, employment output and prices of goods and services.

Though presidents can't control interest rates directly, they can discuss their stance on current monetary policy and its impact on rates. But this can be a touchy topic. “Institutionally, the Federal Reserve is very protective of its independence because that independence helps it achieve its mandate,” Fulford said.

Key Takeaways. The Federal Open Market Committee is a branch of the Federal Reserve System. The FOMC determines the direction of monetary policy by directing open market operations. The committee is composed of the seven members of the Board of Governors and five Federal Reserve Bank presidents.

The FOMC's decisions on interest rates have a significant effect on the U.S. dollar. Being aware of the scheduled dates for FOMC meetings and knowing whether there is a Fed meeting on the day allows you to be prepared for the crazy volatility that might occur in the markets.

Almost all economists polled by financial data firm FactSet are predicting that monetary policy makers will maintain the federal funds rate in a range of 5.25% to 5.5% — the highest level in 23 years, and where it's sat since the Fed's July 2023 meeting.

To increase the money supply in the economy, the Fed uses the open market operation where it buys the stocks and bonds of the public. As the Fed makes purchases from the public; thus, it provides money to the public.

What Is the Current Prime Rate? As of May 20, 2024, the current prime rate is 8.50%, according to The Wall Street Journal's Money Rates table. This source aggregates the most common prime rates charged throughout the U.S. and in other countries. The federal funds rate is currently 5.25% to 5.50%.

The FOMC will start selling government securities on the open market. When banks buy these securities, they will have lesser money to loan out to other banks, increasing the federal funds rate. However, the money supply has reduced as banks have used their money to purchase the government bonds sold by the FOMC.