Spotlight: The Federal Reserve This Week

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Photo by Michael on Unsplash

So here is the deal. Ever since Covid-19, inflation rate and interest rate have been playing games here.

The Federal Reserve or more widely known as the Fed, is the key player in this game. And ever since then, everybody has been waiting up on their meeting on this or more known as FOMC (Federal Open Market Committee) meeting on rate decision.

For this week, it is happening on the Wednesday, 20 March 2024.

Ever since the last inflation rate report, it has not been doing well as it is pretty persistent. On top of that, the non-farm payrolls data has seen an uptick or a slight uptick depending on how you interpret it. Meanwhile, the stock market has been deemed to be running hot and mind you, it is the earnings release period as well and we all know that certain companies will still be having good profits shown considering certain hype going on currently.

So, with that said, previously, the mass has been having this “prediction” whereby the Fed would do 6 rate cuts this year. Then, after all the reports coming out, they started to think that maybe there will be just 3 rate cuts this year.

Now, I can understand that this shift in “prediction” is due to the every changing news that can affect it. However, it is also the reason why I usually treat such news as noise. Good to know, but don’t need to take it into heart, soul, blood and bone. The main reason is how does it play apart in the long term for those who invest? How long should you pay attention to this high interest rate? How does it affect your portfolio if you haven’t done anything? For traders, this for sure can affect in the short-term. So ultimately, how does it affect you and your stuff?

The interest rate has been on a still since July 2023. There are no whatsoever reasons that it might not be standing still. I mean, the Fed already made it clear how they determine the rate and since they are human beings, you can feel how they are feeling whenever they see the report, or even the various reports. Most importantly, usually Mr. Powell will say something on the day itself.

So why am I ranting? I am just a normal person dwelling in the finance world, and also a former financial consultant. So, during that period, I would follow all of these closely so that I could update my clients on what’s up and whether they should take actions on their portfolio or financial decisions in life.

It was undoubtedly tiring as usually professionally speaking, they are all long term investors supposedly. After a while, you would notice that the news are hyping up too much and it is not good for your heart. We all need to learn how to filter the noise accordingly.

So here is the dot plot, which maps out policymakers’ expectations for where interest rates could be headed in the future. It is a really good chart by Yahoo!finance.

So we clearly can see that from the inside, there will be rate cuts, based on the chart above. It is, however, is not definite of course. I mean, the ones from September 2023 and December 2023 show some differences. However, what caught my attention is the year 2025, 2026 and the “longer run” version.

We are only at mid March 2024 and if it needs until 2026 to reach 2-2.5% rate, you better start thinking about the value of your money. On top of that, we have seen how inflation rate can be sticky at times and this only means that interest rate will be higher for longer.

Now, people will be like big companies are shelled out from this considering they have the money power. Some companies are fine with this considering they have done refinancing so debts are all good. Yes, businesses are good. What about yourself on a personal level?

I literally had someone just realised things have gotten expensive last week, when things have been pricing high for more than a year.

Nonetheless, you still cannot neglect yourself. Be alert and with whatever is gonna happen with the Fed’s announcement, remember to be nimble and navigate the tide accordingly. At least, we all know this announcement is still a big deal and, just filter all the noises, have your own formed opinion based on all the news, and fact check on the day itself.

Wrap Up

This upcoming rate decision announcement is always a big deal especially during this situation where economy is in tricky state. We all have seen how the different stock markets perform and how businesses are laying off but revenues are soaring. Things just don’t make sense sometimes but ultimately, remember how to navigate the tide.

With that, thank you for reading. If you think these might be helpful to other people, feel free to share. Also, I am not a professional and this article is by no means an advice to buy nor sell. Always do your own research. Believe in yourself and not other people.

Thank you for reading.

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