Rates Remain Unchanged; Three Cuts Still Targeted

As expected, the Federal Reserve made no changes to the federal funds rate on Wednesday afternoon, keeping the range where it has been since last July: between 5.25% and 5.5%. The markets trended modestly higher on the news, hopeful that the Fed remains on track to lower rates, possibly as early as this spring.

The S&P 500 was up 35 points, or 0.7%, Wednesday afternoon as of 3 p.m. Eastern, while the Nasdaq Composite jumped 159 points, or 1%, and the Dow Jones Industrial Average moved 147 points higher, or 0.4%.   

Still on track for three cuts in 2024

“Recent indicators suggest that economic activity has been expanding at a solid pace. Job gains have remained strong, and the unemployment rate has remained low. Inflation has eased over the past year but remains elevated,” the Fed said in a statement released Wednesday afternoon. “The committee seeks to achieve maximum employment and inflation at the rate of 2% over the longer run. The committee judges that the risks to achieving its employment and inflation goals are moving into better balance. The economic outlook is uncertain, and the committee remains highly attentive to inflation risks.”

The Fed said it won’t move to lower rates until it has “gained greater confidence that inflation is moving sustainably toward 2%.” Inflation as measured by the Personal Consumption Expenditures (PCE) price index was 2.4% in January, the latest month for which data is available. The PCE has historically been a key indicator for the Fed. Inflation as measured by the Consumer Price Index (CPI) was 3.2% in February.

In addition, the Fed said it will continue to monitor economic data and be prepared to adjust its stance if risks emerge. It will also continue reducing its holdings of Treasury securities, agency debt and agency mortgage-backed securities.

In a 2:30 p.m. Eastern press conference following the release, Fed Chair Jerome Powell reiterated commentary from the previous meeting that rates have likely peaked for this cycle, adding that they expect to start dialing back rates this year.

There had been some concern that the Fed’s economic projections, or “dot plot,” might change, signaling two rate cuts in 2024 instead of three. However, the consensus among Fed members calls for rates to be at a range of 4.5% to 4.75% at the end of the year, which would effectively be a three-quarter-point cut. The consensus for 2025 moved from four rate cuts in past projections to three, cutting rates to a range of 3.75% to 4%. The consensus for 2026 calls for rates to be at a range of 3% to 3.25%.

What’s next?

Powell said the Federal Open Market Committee would make decisions “meeting by meeting” and would not comment on the timing of the first rate cut. He reiterated that the FOMC would continue to monitor incoming inflation and economic data and make decisions accordingly. The next meeting is April 30-May 1, followed by one on June 11-12.

The market seemed to take the news in stride, as the results were as expected. The biggest movers on Wednesday were associated with bitcoin and cryptocurrencies.

Several leading bitcoin-mining stocks were leading the way on Wednesday. CleanSpark (NASDAQ:CLSK) was one of the top gainers on the day, up nearly 19% to over $19 per share, while Marathon Digital Holdings (NASDAQ:MARA) was up 13% to around $22 per share. Riot Platforms (NASDAQ:RIOT) was up 10.6% to $12.27 per share, and bitcoin also gained on Wednesday, jumping about 6% to over $65,400.