Federal Reserve holds rates steady once more in March
Central bank policymakers have decided to hold interest rates at their current target range of 5.25% to 5.50%. The move was widely expected by the markets.
–Darla Mercado
Where markets stand before the Fed’s rate decision
The three major averages hovered near the flatline as investors braced themselves for the Federal Reserve’s rate decision.
The S&P 500 inched downward by 0.06%, while the Nasdaq Composite ticked lower by 0.08%, as of 1:36 p.m. ET. The Dow Jones Industrial Average slipped by roughly 6 points, or 0.02%.
S&P 500 intraday action
Treasury yields also held steady in the lead up to the Fed’s announcement. The rate on the 2-year Treasury ticked down by less than 2 basis points to 4.675%. The 10-year yield also inched down by less than 2 points to 4.279%.
–Darla Mercado
Never mind the interest rate policy. Focus on the Fed’s balance sheet
The central bank’s stance on interest rates and how it will proceed are top of mind for investors, but don’t forget about the Federal Reserve’s wind-down of its balance sheet.
The central bank has been running off its $7.6 trillion in Treasury, mortgage-backed securities and other assets – and it may soon taper and ultimately end the shrinking of its balance sheet. Right now, the Fed is allowing up to $60 billion a month in Treasurys to roll off of its balance sheet without being reinvested, along with up to $35 billion in mortgage-backed securities.
Investors will be listening for details on how the Fed will go about winding down its balance sheet, an issue Fed Chair Powell may address during his news conference.
Read more here from CNBC’s Jeff Cox about the Fed’s balance sheet.
–Darla Mercado, Jeff Cox
Where consumer rates stand since the Fed began tightening policy
It’s been two years since the Federal Reserve first raised interest rates in this latest cycle, and the move has had a significant impact on consumers’ wallets.
Since the Fed began raising rates in March 2022, borrowers have had to shell out more in interest expenses. During the week of March 11, 2022, a 30-year fixed mortgage had a rate of 4.29%, compared to 7.09% as of March 15, 2024, according to MND.
Carrying debt on a credit card balance also became more costly, with the annual percentage rate rising to 20.75% from 16.34% since the Fed embarked on its tougher stance roughly two years ago, per Bankrate.
Even as times have become tougher for borrowers, savers and fixed income investors are reaping the benefits of higher rates.
For starters, the yield on the 2-year Treasury is now 4.67%, compared to 1.75% back in March 2022, according to Refinitiv. Parking cash in a certificate of deposit has also become more rewarding, with annual percentage yields on 6-month CDs rising to 3.298% from 0.22%, according to Lending Tree.
–Darla Mercado, Nick Wells
Fed’s dot plot of rate expectations will be key Wednesday
Central bank policymakers are widely expected to stand pat on interest rates at the conclusion of their March policy meeting, but the dot plot will be the main event for traders.
The policy-setting Federal Open Market Committee will issue its dot plot, a breakdown of individual members’ expectations for interest rates moving forward.
Investors kicked off 2024 with a sanguine outlook on interest rate cuts, anticipating that the Fed would lower rates six or seven times in increments of quarter percentage points. But those expectations have come down to reality, as investors now anticipate rates first falling in June and they forecast only three cuts.
The shift in the Street’s forecast comes as economic data shows that inflation is proving to be harder to quash than many had hoped.
Read more from CNBC’s Jeff Cox on what to expect from the Fed’s meeting.
–Darla Mercado
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