Markets and Economy

Fed meeting May 2024: Rates stay put as Fed waits for more data

The Federal Reserve Headquarters in Washington DC on a sunny day.

This afternoon, I live tweeted my perspectives on the US Federal Reserve (Fed)’s May interest rate announcement and press conference. As a refresher, the Fed has kept rates steady for its past five meetings, and today continued that trend.

The Federal Open Market Committee (FOMC) noted a "lack of further progress" in recent months in reaching the Fed's inflation goal. The Fed has made clear that it needs greater confidence to enact a rate cut. I hold out hope it will get that in data in the coming months.

It is important to note that the guidance paragraph of the FOMC statement did not change from the previous iteration. I see it as a good sign that their language didn’t become more aggressive.

Fed Chair Jay Powell reiterated in his press conference that it will take longer for the FOMC to become confident enough to cut rates. That's OK. I still believe it won't take very long to get more confident.

During the press conference, Powell was asked about stagflation. His retort: “I don't see the ‘stag’ or the ‘flation.’" I couldn't agree more. Here’s my take on the stagflation question in my latest Weekly Market Compass

Powell said the upcoming presidential election won't alter the Fed's decision-making. He was clear that the Fed needs to do what's right for the economy. This suggests to me that the Fed won't avoid policy actions in the fall just because there’s an election in November. All the Fed watchers who scratched out their calendars for the fall may need to do some erasing.

The S&P 500 Index went up after the announcement and moved up even more after the start of the press conference. I think that speaks to the Fed's thoughtfulness and measured perspective — that it is not over-reacting to recent disappointing inflation data.

All in all, this was a rather dovish #FOMC announcement and press conference, especially given market expectations (and my expectations). Markets reacted accordingly as US stocks went up (as we saw from the S&P 500) and US Treasury yields went down. 

Follow me @kristinahooper on X for live tweets from the next Fed meeting in June.