Next FED Meeting 2024: Key Dates & Expectations

The FED is the central bank of the United States. It is one of the most influential institutions in the world. Let’s see what it is, what it decides, what impact the FED meetings have on the markets and the agenda of FED meetings for 2024.

Let’s take a look at what to expect from the Federal Reserve, not just at their next meeting but throughout the rest of the year. It is undoubtedly one of the topics that keep investors most nervous, as it directly affects the development of the markets (stocks, currencies, indices) and the economy itself.

What happens at the FED meetings?

When talking about the Federal Reserve (FED), to understand everything that happens during their meetings, we need to know four key concepts:

• FOMC (Federal Open Market Committee): It consists of 12 members. It is responsible for monetary policy strategies to achieve its objectives. It meets 8 times a year, approximately every 6 weeks, in Washington. Generally, it offers a press conference after half of the meetings in a year.
• FED Minutes: Detailed summary of all topics discussed by the FOMC during its meetings. The minutes are published 3 weeks after each FOMC meeting and reflect the opinions of all members who participated in the meetings.
• Beige Book: A set of data that the FOMC uses in its meetings to make decisions. It is published approximately 2 weeks before the FOMC meetings.
• Dot Plot: A graph in which a series of points appear. This chart is published after each Federal Reserve meeting and reflects what each member thinks about whether interest rates will rise or fall in the remaining months of the year and in subsequent years and by how much. It was created in 2011 when Ben Bernanke was the President of the Bank.

During Federal Reserve meetings, particularly those of the Federal Open Market Committee (FOMC), members begin by reviewing national and global economic conditions. This includes examining a range of economic indicators, such as inflation rates, unemployment figures, and GDP growth, to assess the health status of the economy.

The main agenda is discussing and deciding on monetary policy measures. This involves deliberations on interest rates (whether to raise, lower, or maintain them) based on the current economic outlook. The goal is to achieve maximum employment, stabilise prices, and moderate long-term interest rates — the three key objectives of the Federal Reserve.

FED Meetings Calendar 2024 – 30 & 31 July

The Federal Reserve meets 8 times a year every 40 days between each meeting. Let’s have a look now to the meetings’ calendar for 2024:

• January 30-31.
• March 19-20.
• April 30-May 1
• June 11-12
• July 30-31.
• September 17-18.
• November 6-7.
• December 17-18.

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Last FED Meeting: Interest Rates and QT Tapering are maintained

Thus, the last FED meeting that took place between April 30 and May 1 left bittersweet news in the markets, but somewhat expected, given the bad inflation data that has been accumulating since the entry into 2024. 

We could say that there were 5 key ideas: 

• Interest rate decision and its reason: The US FED maintained the interest rate range at 5.25%-5.5%, its highest level in 23 years. The decision is based on the fact that inflation is not yet under control, and recent data has shown persistently higher-than-expected inflation. In such a sense, Jerome Powell expressed:
  

In recent months, there has been a lack of further progress towards the 2% inflation target set by the committee.

Jerome Powell, president of the FED, at a press conference on May 1

• Expectations of a drop in the short term: At a press conference, Powell explained that the committee does not expect a rate cut in the short term, even that practically, cuts are ruled out both in the next meeting in June and July.  
• Timing of the first possible rate cut according to the futures market: the most pessimistic market probabilities, reflected in CME futures quotes, suggest that a rate cut may not occur until 2025, while the probabilities are stockings, starting September 2024.

In fact, the outlook begins to be more favourable for the first interest rate cuts.

Of course, Powell assured that it was very likely that there would not be more interest rate rises. 

• QT Tapeting (slowing of repurchases): Of course, given the virtual liquidation of the reverse repo program, which had been providing liquidity to the system, the Federal Reserve announced that it would slow down the pace of decline in its securities holdings starting from June, passing from a rate of 60,000 million dollars to 25,000 million per month. This measure seeks to prevent tensions in the money market while the central bank reduces its balance sheet (but more slowly).
  
• Risks of stagflation in the United States: Finally, Powell rejected the idea that the US economy is at risk of stagflation. He stated that given the low unemployment rates and constant economic growth (even some deceleration), the current situation differs from the 1970s when stagflation was a significant problem. In a somewhat more relaxed tone, he quoted: 

«I don’t see the stag or the lation.»

Jerome Powell

What impact do FED meetings have on the market?

The FED is a crucial institution for the economic health of the United States and significantly impacts global financial markets. 

FED meetings, where monetary policies are determined, especially in relation to interest rates, can have a relevant impact on the financial markets.

What happens when there is a rate increase?

When the FED chooses to increase interest rates or other policies aimed at reducing liquidity in the system in the context of containing the price level, it leads to a slowdown in the economy.

Rising interest rates discourage borrowing, making it more «costly.» Which, in turn, has a negative effect on aggregate demand and the level of consumption.

The reduction in liquidity also affects the stock market. Less liquidity means fewer resources for investments. Therefore, in general, an increase in interest rates is associated with a reduction in the value of shares. However, in some cases, the market may have already «priced in» the effect of the increase, which occurs when the FED has anticipated its monetary policy intentions before the official decision. In these cases, the effect on the market could be more moderate.

In times of uncertainty, such as those following rising interest rates, investing in defensive stocks could be an excellent strategy. Another option could be safe-haven assets, which show a low correlation with the economic cycle, such as gold investing, which could be a good investment strategy.

What happens when there is an interest rate cut?

On the other hand, when there is a decrease in the interest rates by the Federal Reserve (FED) or any other central banking entity, the opposite effect of a rate increase is generally sought. The main consequences of lowering interest rates are:

• Stimulus of the Economy: A reduction in interest rates makes it cheaper to borrow money. This can incentivize businesses and consumers to take out more loans for investment or consumption.
  
• Increased Consumption: As borrowing becomes cheaper, consumers may be more inclined to make large purchases, such as homes or cars, which can boost aggregate demand in the economy.
  
• Impact on Stock Markets: Lower rates can positively affect stock markets. By reducing financing costs and increasing consumption and investments, companies can see their profit expectations, increasing their share prices.
  
• Currency Devaluation: In some cases, a reduction in interest rates can lead to a devaluation of the national currency against other currencies, as investors will seek higher returns in other markets, selling the local currency in the process.
  
• Inflation Risk: Although lowering rates seeks to stimulate the economy, a side effect may be an increase in inflation. As consumption and investment increase, prices can begin to rise, especially if supply cannot meet the increase in demand.

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