Was the Federal Reserve Dovish or Hawkish… or a Bit of Both?

federal reserve dot plot interest rates chart

The Federal Reserve kept interest rates unchanged and essentially suggested 3 rate cuts on the table for 2024.

Both the commodities and equities markets took that as a sigh of relief.

The S&P 500 ETF (SPY) made new all-time highs and gold and gold miners flew.

For 2025, the Federal Reserve sees the jobs rate as holding steady at 4.1%. They see inflation dropping to 2.2% as measured by the PCE numbers. And they see the Fed Funds rate dropping significantly by 2026 and in the longer run.

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However, the Federal Reserve is committed to a 2% inflation rate.

And the most interesting part, Chairman Powell said that there could be seasonal effects in inflation data. Sounds like many words to say the one word- “transitory”. Powell is watching the labor market and will become more dovish if the unemployment rate rises.

He feels confident that the policy rate has peaked. But also wants us to understand that “higher for longer” is not off the table.

Some analysts took the minutes as a more hawkish Federal Reserve, while the initial market reaction interpreted the meeting as dovish.

Powell did a great job pandering to both doves and hawks.

Our focus remains the same as far as the next direction. 

The Junk Bonds ETF (HYG) rallied and remain risk-on.

The Long Bonds ETF (TLT) is still at the tipping point, holding 92.00 support yet not very clear on the next moves. Could they spoil the fun? Or drive everything up even higher?

tlt treasury bond etf trading important big investing move coming chart

And then there are the other indicators for inflation.

The Gold Miners ETF (GDX) ran up nearly 5% and cleared a 50-week moving average for the first time since December. If GDX clears the January high, whoa.

Silver also ran and is priced well over the January 6-month calendar range high.

Sugar is still not “1979” exciting but can be if clears over 22 cents a pound and keeps going.

Are we readying for a “no landing” where everything runs up and inflation remains in control.

Or like our overlay chart, did the Federal Reserve just relay they want lower rates to pay off the ginormous debt in favor of worrying about the hyperinflation potential?

Twitter: @marketminute

The author may have a position in mentioned securities at the time of publication. Any opinions expressed herein are solely those of the author and do not represent the views or opinions of any other person or entity.