The Federal Open Market Committee (FOMC) recently conducted a joint meeting with the Board of Governors of the Federal Reserve System. This was the second of eight scheduled meetings for this year, during which members evaluated U.S. financial conditions and the nation's economic situation.
According to the minutes from the meeting, which took place on March 19 and 20, there was a slight easing since the January FOMC meeting. The minutes also highlighted higher equity prices offsetting increased interest rates and a nominal rise in Treasury yields. "Both the estimate of the expected federal funds rate path derived from futures prices and the modal federal funds rate path implied by options prices had risen during the inter-meeting period," it was noted. Additionally, broad equity prices have grown since January, propelled by substantial increases in valuations of large-capitalization technology companies. The U.S. money markets have also stabilized.
The minutes further discussed the effectiveness of rate control, emphasizing that "the effective federal funds rate is within the committee's target range and has remained insensitive to daily changes in the supply of reserves since January." However, they acknowledged that significant uncertainty exists over demand for reserves.
In examining the U.S. real gross domestic product, it was found that it expanded at a solid pace during the first quarter according to data available at the time of the meeting. The Staff Review of Economic Situation as per minutes revealed that labor market conditions continue to show signs of strengthening. Although consumer price inflation—measured by a 12-month change in price index for personal consumption expenditures (PCE)—still exceeds 2%, it is trending downward. According to Staff Economic Outlook mentioned in minutes, total and core PCE price inflation are both expected to drop to 2-1/2% by end-2024 as demand and supply in product and labor markets become more balanced. They are projected to reach 2% by 2026.
As stated on the Federal Reserve website, the FOMC comprises 12 members: the seven members of the Board of Governors of the Federal Reserve System, the president of the Federal Reserve Bank of New York, and four of the remaining 11 Reserve Bank presidents, who serve one-year terms on a rotating basis.