Dovish Powell Keeps the Music Playing

March 25, 2024

Dovish Powell Keeps the Music Playing Photo

Financial markets cheered the news from last week’s Federal Reserve (Fed) meeting, reaffirming the expectation for three interest rate cuts this year.1 The S&P 500 Index notched its 20th all-time closing high Thursday while Treasury yields moved lower across the curve.2 Fed Chair Jerome Powell somewhat dismissed the recent uptick in inflation as a “sometimes bumpy road toward 2%.”3 While the initial market reaction has been positive, the material easing in financial conditions since the Fed’s dovish shift in communication late last year may slow some of the disinflationary trends in place.

Friday’s release of the Fed’s preferred inflation gauge — personal consumption expenditures (PCE) —  will provide another critical test for the Fed’s “bumpy road” thesis.4 The “everything rally” is susceptible should Fed policymakers have another misstep on inflation.



1CNBC – Fed holds rates steady and maintains three cuts coming sometime this year; 3/20/24

2Morningstar – Wall Street revamps 2024 S&P 500 targets after record-setting stock-market rally; 3/23/24

3Board of Governors of the Federal Reserve – Transcript of Chair Powell’s Press Conference March 20, 2024

4MarketWatch – U.S. Economic Calendar; as of 3/25/24

Tags: U.S. markets | Federal Reserve | Interest rates | Inflation indexes | PCE | Market rally

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