Fed Holds Rates, Hints at Cuts Later While Prioritizing Inflation Fight

The Federal Reserve kept interest rates unchanged but signaled a potential bias towards cuts later in 2024. Despite a strong economy and resilient job market, inflation concerns remain paramount.

Key takeaways:

• Rates on hold: No change to the 5.25%-5.50% target range.
• Cautious optimism for cuts: The Fed acknowledged an eventual shift towards cuts but emphasized data dependence and a commitment to reaching the 2% inflation target.
• Lingering inflation concerns: While inflation has eased, it remains elevated, prompting the Fed to maintain its hawkish stance.
• Strong economy and tight labor market: These factors allow the Fed to prioritize curbing inflation without immediate recession fears.

Market reaction was mixed. Bond yields fell while stocks dipped on concerns about delayed easing.