Hourly Market Review - Mar 20, 2024 15 PM
On Wednesday, stocks experienced gains with the S&P 500 surpassing the 5,200 level for the first time following the Federal Reserve's decision to keep interest rates at a 23-year high while maintaining its expectation for three rate cuts before the end of 2024. The S&P 500 and Nasdaq Composite rose by 0.7% and 0.9%, respectively, while the Dow Jones Industrial Average increased by 280 points, or 0.7%.
In the press conference following the Federal Reserve's March policy meeting, Chair Jerome Powell highlighted several key points:
Inflation Trends: Powell noted that while inflation readings were slightly higher earlier this year, the Fed is focusing on the positive longer-term trends. Over the past year, inflation has eased notably, although it remains too high.
Monetary Policy Stance: The Fed's current benchmark rate is believed to be helping bring inflation back to the 2% target. Powell emphasized that the restrictive stance of monetary policy is putting downward pressure on economic activity and inflation.
Risks of Policy Adjustment: Powell warned that straying too soon or too much from the current policy could reverse the progress made in reducing inflation. This might ultimately require even tighter policy to get inflation back to the 2% target.
Recent Inflation Data: Powell acknowledged that inflation data for January and February came in a bit higher, leading to upward revisions in the Fed's inflation projections. However, he stated that progress is still being made in bringing inflation down.
Balance Sheet Reduction: The Fed officials discussed slowing the pace of the central bank's balance sheet reduction (quantitative tightening or QT) at the March meeting. Powell indicated that it would be appropriate to begin tapering QT fairly soon. The balance sheet has been reduced by over $1.5 trillion since the start of QT in mid-2022. Slowing the pace of QT could reduce potential financial market stress without necessarily shrinking the balance sheet less overall.