March Overview As widely expected, the Fed held its benchmark rate range steady at 5.25-5.50% at its most recent meeting. The decision to do so was unanimous. Although the median rate expectations for 2024 remained the same (4.6%), projecting a total reduction of 75 bps by year-end, estimates for 2025 (3.9%) and 2026 (3.1%) moved upwards, suggesting a slightly tighter framework than before. Median economic projections saw growth estimates increase while the unemployment rate came down marginally. Inflation readings increased for this year, presumably as readings to date have come in higher than previously expected, while estimates for the latter years remained unchanged. Despite progress made to date, the Fed remains “attentive to inflation risks,” and given growth has held up and the labor market remains resilient, it is focused on leaving rates at a sufficiently restrictive level until it gets more evidence that inflation continues to converge on their longer-term target. The result has been a shift in market expectations for the timing of the first rate cut to the summer.
Read More
The NEAM Vantage Point series of publications delivers actionable insights to insurance executives by covering a wide range of investment and capital markets topics relevant to the insurance industry.