February 5, 2024 — Fed Holds Rates Steady and Job Market Booms


The Fed met last week, and as expected, chose to keep interest rates steady; they did indicate rate cuts are possible, but not imminent. The federal funds rate remains in a range of 5.25 to 5.5 percent, the highest it has been in more than 20 years.  The Fed is hesitant to act too soon, wary that the downturn in inflation last year will not continue into 2024.

The markets had been pricing in a fifty percent chance rates will come down at the Fed’s next meeting March 19-20, but Fed Chair Powell said last week he did not think that would happen. In December, the Fed indicated there could be three rate cuts this year as long as inflation continued to trend down to their 2 percent target and economic growth remained muted. The economy has managed to avoid a downturn despite high rates, as market force rebalanced naturally in the second half of 2023.

The Fed is focused on addressing two risks: moving too slowly and the economy falls under high rates, leading to rising unemployment, and easing too much, too soon, leading to rebound inflation.

After the Fed’s meeting concluded, the Labor Department announced the economy added 353,000 new jobs in January. The number was the strongest in a year and doubled expectations. Investors now believe it may take longer for rates to come down, given the apparent economic strength.