Executive summary
As widely expected, Federal Reserve (Fed) policymakers kept the federal funds rate unchanged (target range of 5.25%-5.50%). Within the committee’s quarterly economic projections, officials now see stronger near-term economic growth but similar inflation next year and fewer rate cuts next year and in 2026.
During the press conference, Chair Jerome Powell stated that plans to slow the balance sheet runoff were coming soon, which we think could be unveiled in May. Chair Powell was also steadfast on the notion of getting inflation down to 2% over time. Stocks cheered the rosier outlook, but U.S. Treasury yields swung sharply down, up, and down again during the press conference.
Ultimately, the Fed remained on hold with respect to cutting rates, but Powell’s comments leaned dovish. We believe the Fed will begin lowering rates this summer, most likely in June. That would ease financing pressures on consumers and businesses alike, making a soft landing more achievable.
