Interest Rates Held Steady, Markets Jump

Team Veye | 13-Jun-2024

The two-day Federal Open Market Committee (FOMC) meeting ended yesterday with The US Federal Reserve keeping the benchmark interest rates unchanged at 5.25 per cent - 5.50 per cent for the seventh straight meeting. 

The decision was in line with Wall Street estimates after May CPI Data reflected inflation was progressing, though slowly, towards its two percent goal.

At its fourth Fed meeting of the year on 12 June 2024, rates were held at the two decade high mark. The May CPI inflation remaining unchanged against market expectations. The consumer price index was unchanged for the month of May, less than the market estimate for a 0.1 per cent monthly increase.

The Fed seemed to be in no rush to cut rates because of a good job market and indicated towards just one rate cut this year as against earlier expectation of three cuts.

The CPI report led to the fall in yield on the U.S. 10-year Treasury note which later recovered after Fed Chair aired ongoing inflation concerns. 

Though adopting a wait and watch policy, Federal Reserve Interest Rates depend on slowing inflation but can also come if job market fails to hold up.

Further decisions on federal interest depend on the cpi inflation data. Fed policymakers normally revise their options for Fed rate hikes or cuts, depending on how economic growth and inflation evolve over time. The Fed raised the forecast for 2024 US core inflation and held GDP projections at the earlier levels. 

The markets rallied with S&P 500 ending the day 0.85 per cent higher at a new record 5,421.03. The Nasdaq also climbed 1.53 per cent to close at a new record 17,608.44. However, Dow Jones bucked the trend to move into the red closing down 0.09 per cent.

Tech was the best performer, closing with 2.5 per cent gain with Apple and Nvidia surging higher.

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