The Federal Reserve, as expected, left their key borrowing rate at 5.25-5.50%. There was also very minimal change to their written statement. Chairman Powell’s press conference had the chairman repeating that they are waiting for a little more confidence that they are on a sustained path towards 2% inflation before cutting. There was also a discussion that they may begin slowing the reduction in their balance sheet holdings fairly soon. Most importantly today, the dot plot still shows the belief that there will be three rate cuts in 2024.
Chairman Powell’s press conference was a lesson on ducking and weaving to avoid committing to any specifics as the press asked questions. He did not get cornered. It also seems that the current data does little to change his message. Listening to his past few months of public statements leads me to believe the Fed has their plan already mapped out. The statements of being dependent upon current data are solely for the purpose of not having to share their plan. I am sure that unless there is a major positive or negative economic change, their plan will not change.
Current PCE Core inflation is 2.8% year over year. The Fed expectation is for year end PCE Core to be 2.6%. When the Fed states that they desire more confidence yet anticipate three cuts this year, there really does not need to be much improvement over the next few months before rates will be cut. We should see that begin around the beginning to middle of this summer. As a result, we could finally begin seeing a more sustained lowering of mortgage rates beginning in the next few months.