02:49 PM EDT, 04/30/2024 (MT Newswires) -- The Federal Open Market Committee is again expected to make no change to the range of its federal funds rate target, keeping it at 5.25% to 5.5%, so markets will look to the FOMC's post-meeting statement and Federal Reserve Chairman Jerome Powell's press conference for signals that fewer rate cuts are expected this year.
The FOMC's statement following Wednesday's meeting is due for release at 2:00 pm ET, with Powell's press conference scheduled for 2:30 pm ET.
The CME FedWatch Tool currently shows a 99.5% chance being priced in for no change in the federal funds rate and a 0.5% chance of the range being decreased by 25 basis points to a range of 5% to 5.25%.
Recent comments from Fed officials, including Powell, have suggested that the stronger-than-expected data released since the March 19-20 meeting have shifted the FOMC's timing of rate cuts further out and could result in fewer total rate cuts this year than the median of three reductions reflected in the Summary of Economic Projections released then.
Some officials have even suggested that further rate increases cannot be ruled out if the progress on inflation stalls further or the rate of inflation rebounds.
As a result, markets have pushed back their outlook for the timing of first rate cut further. The CME tool shows a 9.9% chance of a reduction in June, a 24.8% chance by July, and a 48.9% chance that rates will be lower by September. Currently, there is a 75% chance of lower rates by the end of the year, compared with 99% a month ago.
There will not be an update to the Summary of Economic Projections at this meeting.
"This meeting is likely to be a set-up for a likely downward revision in the median projection for rate cuts this year at the June meeting relative to the prior dot plot that showed 75 basis points of cuts in 2024," Scotiabank Vice President and Head of Capital Economics Derek Holt said in a research note. "I think all estimates between no cuts and 50 basis points of cuts this year are reasonable and will be informed by data and developments."
Markets will also be watching for any discussion about when the FOMC will begin to slow its pace of reduction in its securities holding. According to minutes of the March meeting, no decision was made then but there was agreement that the slowdown should begin "fairly soon."
"No policy changes are expected but watch for further discussion on balance sheet plans with additional emphasis upon timing the tapering of quantitative tightening in the minutes three weeks hence," Holt said. "We think that the pace of roll-off for Treasuries will be scaled back by June."
