Summary of the Fed’s monetary policy statement

The US Federal Reserve has decided to keep interest rates steady at 5.25%-5.50% and continue reducing its balance sheet at an ongoing pace since May 2023. In their announcement, Federal Reserve officials highlighted the strength of the US economy and the robustness of the labor market. While progress on inflation has been acknowledged, they cautioned that the effort to stabilize prices is not yet finished. They noted an improved balance in the risks associated with achieving the Fed's dual mandate of maximum employment and stable prices, affirming their commitment to data-driven decision-making.

Following two consecutive months of unexpectedly high inflation data, the Federal Reserve adjusted its monetary policy outlook for 2025. Although the median forecast for 2024 remains unchanged at 4.6% from December's projection, the forecast for the Federal Funds Rate (FFR) for 2025 was revised upwards from 3.6% to 3.9%. Other economic indicators were also updated in their statement.

• The Gross Domestic Product (GDP) for 2024 was revised to 2.1%, up from 1.4% in December.
• The Unemployment Rate was revised downward, expected to fall to 4.0%, from 4.1%.
• The Personal Consumption Expenditure (PCE) Price Index target wasn’t changed, remaining at 2.4%, while core PCE is estimated to end 2024 at 2.6%, up from 2.4%.

Following the release of the data, the yield on the US 10-year Treasury note decreased by two basis points to 4.275%. Concurrently, the US Dollar is experiencing downward pressure.