U.S. Fed leaves rates unchanged again

S&P 500 is comfortably in the green at writing after the U.S. Federal Reserve left its benchmark overnight borrowing rate unchanged at 5.25% to 5.5%. 

Fed indicates just one rate cut in 2024

Members of the Federal Open Market Committee signalled only one rate cut this year on Wednesday. 

That would be followed by another four rates cuts of a quarter-point each next year to bring the benchmark federal funds rate down to 4.1% by the end of 2025.

The FOMC statement no longer talked of a "lack of further progress" on inflation today. Instead, it acknowledged that "there has been modest further progress toward the Committee's 2.0% inflation objective".

Also on Wednesday, the U.S. Bureau of Labour Statistics said inflation (CPI) was up less than expected in May as Invezz reported here. The S&P 500 index is currently up more than 15% versus its year-to-date low.

FOMC's inflation projections for 2024

Note that the benchmark overnight borrowing rate has stayed put since July of 2023.

And four members of the Federal Open Market Committee now want them to remain unchanged for the rest of this year as well versus only two who voted against cutting interest rates this year in the last policy meeting.

Participants also now expect inflation at 2.6% in 2024 versus their previous projection of 2.4%.

Today's rate decision arrives shortly after the U.S. gross domestic product (GDP) was reported to have climbed at an annualised pace of 1.3% in the first quarter of 2024 - softer than the reading for the most of last year. S&P 500 is now up some 135% versus the pandemic low.

What else was noteworthy today?

The FOMC summary of economic projections now see unemployment rate keeping steady at the current 4.0% through the remainder of 2024. The statement also read on Wednesday:

The CPI data and Fed's rate decision arrives about a month after Brian Belski, senior strategist at BMO Capital Markets, raised his year-end target for the S&P 500 to 5,600 - the highest on Wall Street agreeing that he previously underestimated strength of the market momentum.

His forecast suggests potential for another 3.0% gain in the benchmark index by the end of 2024.