Joe McHugh’s Post

"In recent months, there has been a lack of further progress toward the Committee's 2 percent inflation objective. The Committee seeks to achieve maximum employment and inflation at the rate of 2 percent over the longer run... In support of its goals, the Committee decided to maintain the target range for the federal funds rate at 5-1/4 to 5-1/2 percent. In considering any adjustments to the target range for the federal funds rate, the Committee will carefully assess incoming data, the evolving outlook, and the balance of risks. The Committee does not expect it will be appropriate to reduce the target range until it has gained greater confidence that inflation is moving sustainably toward 2 percent. In addition, the Committee will continue reducing its holdings of Treasury securities and agency debt and agency mortgage‑backed securities. Beginning in June, the Committee will slow the pace of decline of its securities holdings by reducing the monthly redemption cap on Treasury securities from $60 billion to $25 billion. The Committee will maintain the monthly redemption cap on agency debt and agency mortgage‑backed securities at $35 billion and will reinvest any principal payments in excess of this cap into Treasury securities. The Committee is strongly committed to returning inflation to its 2 percent objective." Federal Reserve issues (Federal Open Market Committee) FOMC statement, Press Release, 1 May 2024, https://lnkd.in/gZ_F-jtV

It's looking more and more like a 5.5% type of year... Highlights from the Federal Open Market Committee statement and press conference: 1. "In recent months, there has been a lack of further progress toward the Committee’s 2 percent inflation objective." 2. "Beginning in June, the Committee will slow the pace of decline of its securities holdings [from $60B to $25B]" with a shift from Mortgage Backed Securities to Treasuries. 3. “This is my fourth election. Fourth presidential election here. Read all the transcripts. See if anybody mentions, in any way, the pending election. It just isn't part of our thinking. It's not what we're hired to do. If you start down that road, I don't know how you stop.” 4. Patience, this recent inflation is (hopefully) transitory, labor market is tightening (so policy is restrictive), dismissive on rate hike talk, no talk of stagflation. Futures market on Fed Funds show greater than 50% chance for a cut by September. Rates by year end likely between 5-5.50%.

Federal Reserve FOMC Statement. Excerpt below: "In support of its goals, the Committee decided to maintain the target range for the federal funds rate at 5-1/4 to 5-1/2 percent. In considering any adjustments to the target range for the federal funds rate, the Committee will carefully assess incoming data, the evolving outlook, and the balance of risks. The Committee does not expect it will be appropriate to reduce the target range until it has gained greater confidence that inflation is moving sustainably toward 2 percent. In addition, the Committee will continue reducing its holdings of Treasury securities and agency debt and agency mortgage‑backed securities. The Committee is strongly committed to returning inflation to its 2 percent objective." https://lnkd.in/g6yecjsJ

At the beginning of 2024, many investors were anticipating the Federal Reserve to cut rates starting in the summer. As summer approaches, it seems increasingly likely that rates will remain higher for longer. Jerome Powell announced that for the month of May, the federal funds rate will remain the same, between 5.25 – 5.5%. Here at InFocus, we're constantly monitoring the developments in the Federal Reserve to ensure we're primed for any scenario that may unfold. Our team has analyzed the situation and positioned our portfolios to adapt to the evolving market conditions. Whether rates see a hike or a cut by the year's end, we're prepared to navigate these waters with confidence. Curious to delve deeper into the Federal Reserve's insights from their May 1st FOMC statement? Simply click the link attached to this post to explore further. Your financial journey is our priority, and we're committed to keeping you informed every step of the way.

The Federal Reserve has released its latest Federal Open Market Committee (FOMC) statement, indicating that economic activity continues to expand solidly, though job gains have moderated and the unemployment rate has slightly increased but remains low. Inflation has eased over the past year but remains somewhat elevated. The FOMC aims to achieve maximum employment and 2% inflation over the long term and perceives that the risks to achieving these goals are more balanced. Consequently, the FOMC decided to maintain the federal funds rate target range at 5.25% to 5.5%. The Committee emphasized that future adjustments to the rate will depend on incoming data and the evolving economic outlook. The FOMC is also continuing to reduce its holdings of Treasury securities and agency debt. They reaffirmed their commitment to bringing inflation down to 2%. Impact on USD: The decision to maintain the current federal funds rate and the ongoing reduction in holdings of Treasury securities and agency debt are likely to have several impacts on the USD: 1. Stability in Interest Rates : By maintaining the federal funds rate at its current level, the Federal Reserve signals a cautious approach. This stability can support the USD as investors find predictability in U.S. monetary policy, attracting capital flows into dollar-denominated assets. 2. Inflation Management : The ongoing efforts to reduce inflation to the 2% target, despite inflation remaining somewhat elevated, can bolster confidence in the USD. A lower and more stable inflation rate tends to preserve the purchasing power of the currency. 3. Economic Growth Signals : Continued solid economic activity and low unemployment rates, even with a slight increase, indicate a robust economy. A strong economy can lead to increased demand for the USD as investors seek growth opportunities. 4. Market Reactions : Financial markets often react to FOMC statements and policy implementations. Stability or modest increases in the USD value could be expected as markets interpret the Fed's stance on maintaining interest rates and reducing its balance sheet as positive signals for the economy. Overall, the Federal Reserve's current policies are likely to support the USD by promoting economic stability and managing inflation, though market reactions will also depend on global economic conditions and other central banks' policies.

The Federal Reserve has approved its second consecutive interest rate cut! In an effort to right-size monetary policy, the Fed lowered its benchmark rate by a quarter percentage point (25 basis points) to a new target range of 4.50%-4.75%. #FederalReserve #InterestRates #Economy #MonetaryPolicy #FinanceNews #ConsumerDebt #EconomicGrowth https://lnkd.in/dz4i-Xr9

The Federal Reserve kept the federal funds rate at a 23-year high of 5.25%–5.50%, as anticipated. Although inflation is still rather high, policymakers have seen modest progress towards the 2% target—furthermore, current data points to a steady expansion of the economy. The Federal Reserve determines that there is still a better balance between the risks and rewards associated with meeting its inflation and employment targets. However, until it has more assurance that inflation is steadily approaching 2%, the Fed does not believe it will be appropriate to lower rates. Key takeaways from the FOMC minutes are: 1. The interest rate on reserve balances is maintained at 5.4%. 2. The federal funds rate target range remains- at 5.25% to 5.5%. 3. Overnight repurchase agreement operations have a minimum bid rate of 5.5% with a $500 billion limit. 4. Reverse repurchase agreements are offered at 5.3% with a $160 billion per-counterparty daily limit. 5. Treasury security principal payments exceeding $25 billion p/m will be rolled over at auction. 6. Agency debt and MBS principal payments exceeding $35 billion p/m will be reinvested in Treasury securities. 7. The primary credit rate is maintained at 5.5%. With a huge NFP revision (-818K vs -187K exp), which effectively takes the unemployment rate to 4.9% is quite high. A September rate cut by the Fed is quite certain; as long as there are no surprises ahead. My base case for the September rate cut remains at 25 BPS. A 25 BPS cut would allow the fed to continue its data-dependent approach- a 50 BPS cut, in my opinion, seems excessive as the fed would want to avoid mistakes like the ECB; by cutting too much too soon. Source: US Bureau of Labour Statistics, Federal Reserve.

The End of Fabulous Money Market Rates Is Near You have been able to earn solid returns by parking your money in fairly safe places, our columnist says. But that won’t last much longer. By Jeff Sommer Jeff Sommer writes Strategies, a weekly column on markets, finance and the economy. Aug. 16, 2024 While stocks and bonds have zigged and zagged, often painfully, over the last few years, one area of the markets has been blissfully steady: money market funds. For more than a year, with minimal risk, investors have been able to get more than 5 percent annually — and substantially beat inflation — by just parking their cash in fairly reliable places. This wonderful refuge from the market storms isn’t disappearing. But with short-term interest rates likely to fall soon, the shelter will become less comfortable, and it’s time to get ready. Can you afford to move some of the cash that you don’t need immediately into bonds, which fluctuate in value yet tend to produce better long-term returns than money market funds? And do you have excess cash that may be better invested in stocks, which are likely to produce superior long-term returns but are unreliable over shorter periods, especially in a volatile election year? These aren’t simple questions. Two Key Factors Money market fund investors need to consider two powerful factors — inflation and short-term interest rates. The trend for both is clearly downward. For months now, inflation has been dropping, and this past week, there was fresh evidence that this positive development continues. The annual rate of inflation fell to 2.9 percent in July — the first time since 2021 that it has fallen below the 3 percent threshold. Largely because of declining inflation, the Federal Reserve is widely expected to start reducing short-term interest rates at its next meeting in September. The futures markets are divided on whether the Fed will cut the benchmark federal funds rate by one quarter or one half a percentage point then. But the consensus is that a series of rate cuts will be coming, pulling the benchmark federal funds rate to the 4 to 4.25 percent range by January. It may be wise to start looking beyond money market funds, locking in the relatively high rates now for at least some of your money, and re-evaluating your needs. https://lnkd.in/gRt7GR3j

🇺🇸 The Fed again cuts its interest rates by a further 25 basis points 🇺🇸 There is also talk of a further cut in December, but what does this mean? Usually, when interest rates are cut it will encourage spending into the economy and more borrowing. Will this cut also encourage the market sentiment to rise? You can find out this and more on deVere’s webinar with the top fund managers in the world on Tuesday 12 November, get in touch for more details!

The Federal Reserve has announced a quarter-point cut in its key interest rate, reducing the benchmark target to between 4.25% and 4.5%. This decision comes alongside revised projections for 2025, with the number of expected rate reductions now set at two, down from the previously forecasted four in September. The rate adjustment impacts various consumer debts like auto loans and mortgages. Additionally, the Federal Reserve foresees unemployment at 4.3% and inflation at 2.5% for the upcoming year, reflecting a shift as consumer-price growth stabilizes. Following this announcement, all three major stock indexes experienced a downturn. For more details and the official Federal Open Market Committee statement, visit: https://lnkd.in/exzxnwFW Explore the economic projections from the recent FOMC meeting here: https://lnkd.in/edZc98E6 #FOMC #FederalReserve #EconomicProjections