Following the FED's Interest Rate Decision, Senior Wall Street Analysts Speak: What's the Latest, What is Expected in the Markets?

The FED preferred to keep the benchmark interest rate target range at 4.25%-4.50% by not changing the interest rates for the second consecutive time.

The decision to maintain the current interest rate was made unanimously among FED officials. However, a point of disagreement emerged regarding the pace of balance sheet reduction. FED member Christopher Waller opposed any slowdown in the balance sheet reduction process, insisting that the current pace of reduction should continue.

Josh Jamner, a senior investment analyst at Clearbridge, stated that the FED's economic forecasts indicate a tougher economic environment for 2024. Jamner said, "Policymakers foresee a moderate economic slowdown alongside rising inflation and unemployment" and added, "However, these forecasts are consistent with the latest predictions from Wall Street banks and macroeconomic research firms. Therefore, we do not expect these revisions to have a significant impact on financial markets."

Jamner also emphasized that the FED's policies could ultimately lag behind fiscal policy. The market pricing in federal funds futures shows that the next interest rate cut is not expected until July, and this outlook is unlikely to change in the near term.

Goldman Sachs Asset Management global co-head Whitney Watson pointed out the FED's cautious stance, describing the last meeting as a "wait and see" approach. Watson stated, "The revisions in the Federal Open Market Committee's (FOMC) forecasts carry a hint of stagflation as economic growth and inflation expectations move in opposite directions." It is expected that the FED will observe whether the current slowdown in economic activity will turn into a more significant issue before making any policy changes.

Michele Raneri, Vice President of Transunio and head of research and consulting in the US, stated that despite the relatively optimistic recent Consumer Price Index (CPI) data, the market is not expecting an interest rate cut immediately. However, upcoming labor market data may influence future decisions.

Raneri said, "Despite the current stance of the FED, the possibility of interest rate cuts continues in the later periods of this year, and multiple cuts could occur in 2025." He added, "If interest rates start to decline, consumers may be more inclined to use credit products such as mortgage refinancing and car loans, which they have shied away from in recent years. A more favorable credit environment could stimulate new borrowing activities and support consumer confidence."