Skip to main content

Federal Reserve keeps interest rates on hold, as expected

Despite sticky inflation, reassurance that rates have peaked could leave policy in Goldilocks zone.

01 May 2024

The US Federal Reserve (Fed) concluded that the market gets what the market expects. No one really was expecting any move today (how different to views at the start of the year!) given the inflation dynamics at the moment – inflation’s last mile towards 2% has proven to be the longest one. Even if some are speculating no cuts at all this year, which would be a bold prediction, the majority are now expecting the Fed to make two 25 basis point cuts by year end.

It was welcome to hear in Fed Chair Powell’s press conference that any further hikes are most likely off the table, which, with the persistence in higher inflation prints, would always be a possibility, so tacit acknowledgement from Powell that rates have peaked was music to the market’s ears. It seems that where they currently sit, rates are in Goldilocks territory in their assessment – not too hot to damage growth, and not too cold to lose a grip on inflation, but enough to be restrictive enough where they need them to be. A dovish message from the Fed, or at least more dovish than expected, and even if they did nothing, it is enough for risk assets to rally and start May off with a bit of a bang.

Important legal information
The information in this document is given for information purposes only and does not qualify as investment advice. Opinions and assessments contained in this document may change and reflect the point of view of GAM in the current economic environment. No liability shall be accepted for the accuracy and completeness of the information. Past performance is not an indicator for the current or future development.

Charles Hepworth

Investment Director
My Insights

Related Articles

UK interest rates left unchanged at 5.25%

Julian Howard

Fed leaves interest rates unchanged, as expected

Julian Howard

ECB cuts rates as expected, despite sticky inflation

Julian Howard

Investment Blog