There is so much anticipation with every meeting of the Federal Reserve’s Open Market Committee, which meets around eight times per year. The analysts are over the top with predictions of actions and then they obsess on every word of their post meeting announcements. And a few weeks later, when the minutes of the meeting are released, it all starts over again. In the interim, the members of the Fed make speeches around the country and appear before Congress giving updates on their policy and their view of the economy. And every time they talk, the markets are affected.
But the truth is that the Fed has made no rate decisions for the better part of a year. They do continue activity, such as buying or selling Treasuries and mortgage-backed securities. These purchases, or more recently, lack of purchases, can affect interest rates significantly. So, it is not like they are doing nothing, but in essence they are doing nothing, and the markets are absolutely obsessed with predicting when they will act again. In this case, they are waiting for the Fed to lower short-term rates for the first time since the pandemic.
So, what did the Fed do last week? Nothing. But the words kept flowing and the market analysts are hanging on every word. The message is the same – the Fed needs more evidence that inflation is subsiding before they act unless the economy shows signs of slowing. And thus, far we have not seen enough evidence of a slowdown. We have a slew of data coming in the next week or so—including personal spending, the personal consumption inflation report and the jobs report. So perhaps this data will help spur the Fed to do what we have been waiting for. Or at least sound more optimistic that it is coming.
