Federal Reserve — FOMC Statement (USA, 2024)

Minutes of the Federal Open Market Committee April 30 May 1, 2024 A joint meeting of the Federal Open Market Committee and the Board of Governors of the Federal Reserve Sys- tem was held in the offices of the Board of Governors on Tuesday, April 30, 2024, at 10:00 a.m. and continued on Wednesday, May 1, 2024, at 9:00 a.m.1 Attendance Jerome H. Powell, Chair John C. Williams, Vice Chair Thomas I. Barkin Michael S. Barr Raphael W. Bostic Michelle W. Bowman Lisa D. Cook Mary C. Daly Philip N. Jefferson Adriana D. Kugler Loretta J. Mester Christopher J. Waller Susan M. Collins, Austan D. Goolsbee, Alberto G. Musalem, Jeffrey R. Schmid, and Sushmita Shukla, Alternate Members of the Committee Patrick Harker, Neel Kashkari, and Lorie K. Logan, Presidents of the Federal Reserve Banks of Philadelphia, Minneapolis, and Dallas, respectively Joshua Gallin, Secretary Matthew M. Luecke, Deputy Secretary Brian J. Bonis, Assistant Secretary Michelle A. Smith, Assistant Secretary Mark E. Van Der Weide, General Counsel Richard Ostrander, Deputy General Counsel Trevor A. Reeve, Economist Stacey Tevlin, Economist Beth Anne Wilson, Economist Shaghil Ahmed, James A. Clouse, Brian M. Doyle, William Wascher, and Alexander L. Wolman, Associate Economists Roberto Perli, Manager, System Open Market Account Julie Ann Remache, Deputy Manager, System Open Market Account Jose Acosta, Senior System Administrator II, Division of Information Technology, Board Alyssa Arute,2 Manager, Division of Reserve Bank Operations and Payment Systems, Board Ayelen Banegas, Principal Economist, Division of Monetary Affairs, Board Becky C. Bareford, First Vice President, Federal Reserve Bank of Richmond Penelope A. Beattie,3 Section Chief, Office of the Secretary, Board Carol C. Bertaut, Senior Adviser, Division of International Finance, Board David Bowman, Senior Associate Director, Division of Monetary Affairs, Board Marco Cipriani, Research Department Head, Federal Reserve Bank of New York Todd E. Clark, Senior Vice President, Federal Reserve Bank of Cleveland Juan C. Climent, Special Adviser to the Board, Division of Board Members, Board Daniel M. Covitz, Deputy Director, Division of Research and Statistics, Board Stephanie E. Curcuru, Deputy Director, Division of International Finance, Board Ryan Decker, Special Adviser to the Board, Division of Board Members, Board Wendy E. Dunn, Adviser, Division of Research and Statistics, Board Rochelle M. Edge, Deputy Director, Division of Monetary Affairs, Board Eric C. Engstrom, Associate Director, Division of Monetary Affairs, Board Charles A. Fleischman, Senior Adviser, Division of Research and Statistics, Board 1 The Federal Open Market Committee is referenced as the  FOMC  and the  Committee  in these minutes; the Board of Governors of the Federal Reserve System is referenced as the  Board  in these minutes. 2 Attended through the discussion of developments in finan- cial markets and open market operations. 3 Attended through the discussion of the economic and finan- cial situation. _____________________________________________________________________________________________Page 1 Jenn Gallagher, Assistant to the Board, Division of Makoto Nakajima, Vice President, Federal Reserve Board Members, Board Bank of Philadelphia Peter M. Garavuso, Lead Information Manager, Michelle M. Neal, Head of Markets, Federal Reserve Division of Monetary Affairs, Board Bank of New York Carlos Garriga, Senior Vice President, Federal Reserve Anna Paulson, Executive Vice President, Federal Bank of St. Louis Reserve Bank of Chicago Michael S. Gibson, Director, Division of Supervision Eugenio P. Pinto, Special Adviser to the Board, and Regulation, Board Division of Board Members, Board Joseph W. Gruber, Executive Vice President, Federal Odelle Quisumbing,3 Assistant to the Secretary, Office Reserve Bank of Kansas City of the Secretary, Board Valerie S. Hinojosa, Section Chief, Division of Andrea Raffo, Senior Vice President, Federal Reserve Monetary Affairs, Board Bank of Minneapolis Jane E. Ihrig, Special Adviser to the Board, Division of Samuel Schulhofer-Wohl, Senior Vice President, Board Members, Board Federal Reserve Bank of Dallas Benjamin K. Johannsen, Assistant Director, Division Zeynep Senyuz, Deputy Associate Director, Division of Monetary Affairs, Board of Monetary Affairs, Board Michael T. Kiley, Deputy Director, Division of Mark Spiegel, Senior Policy Advisor, Federal Reserve Financial Stability, Board Bank of San Francisco Don H. Kim,2 Senior Adviser, Division of Monetary John J. Stevens, Senior Associate Director, Division of Affairs, Board Research and Statistics, Board Andreas Lehnert, Director, Division of Financial Balint Szoke,4 Senior Economist, Division of Monetary Stability, Board Affairs, Board Kurt F. Lewis, Special Adviser to the Chair, Division of Yannick Timmer, Senior Economist, Division of Board Members, Board Monetary Affairs, Board Dan Li, Assistant Director, Division of Monetary Clara Vega, Special Adviser to the Board, Division of Affairs, Board Board Members, Board Laura Lipscomb, Special Adviser to the Board, Annette Vissing-J rgensen, Senior Adviser, Division of Division of Board Members, Board Monetary Affairs, Board David L pez-Salido, Senior Associate Director, Jeffrey D. Walker,2 Associate Director, Division of Division of Monetary Affairs, Board Joshua S. Louria, Group Manager, Division of Monetary Affairs, Board Benjamin W. McDonough, Deputy Secretary and Ombudsman, Office of the Secretary, Board Ann E. Misback, Secretary, Office of the Secretary, Board Raven Molloy, Deputy Associate Director, Division of Research and Statistics, Board Norman J. Morin, Associate Director, Division of Research and Statistics, Board 4 Attended Tuesday s session only. Reserve Bank Operations and Payment Systems, Board Jonathan Willis, Vice President, Federal Reserve Bank of Atlanta Paul R. Wood, Special Adviser to the Board, Division of Board Members, Board Egon Zakrajsek, Executive Vice President, Federal Reserve Bank of Boston Rebecca Zarutskie, Special Adviser to the Board, Division of Board Members, Board Page 2Federal Open Market Committee_____________________________________________________________________________________________ Developments in Financial Markets and Open Market Operations The manager turned first to a review of developments in financial markets. Domestic data releases over the inter- meeting period pointed to inflation being more persis- tent than previously expected and to a generally resilient economy. Policy expectations shifted materially in re- sponse. The policy rate path derived from futures prices implied fewer than two 25 basis point rate cuts by year- end. The modal path based on options prices was quite flat, suggesting at most one such rate cut in 2024. The median of the modal paths of the federal funds rate ob- tained from the Open Market Desk s Survey of Primary Dealers and Survey of Market Participants also indicated fewer cuts this year than previously thought. Respond- ents  baseline expectations for the timing of the first rate cut which had been concentrated around June in the March surveys shifted out significantly and became more diffuse. Treasury yields rose materially over the intermeeting pe- riod. At shorter maturities, the increase appeared to largely reflect higher inflation compensation, while at longer maturities, it was attributable mostly to a higher expected path for the real policy rate and higher real risk premiums. Model estimates suggested that inflation ex- pectations rose some, but mostly at shorter horizons. Longer-term inflation expectations appeared to remain well anchored. Broad equity prices fell over the period, as higher interest rates weighed on valuations, while re- cent earnings reports, which were generally solid, pro- vided some support. The dollar strengthened as several foreign central banks were expected to start easing policy before the Federal Reserve. Overall, higher yields and lower equity prices, together with the stronger dollar, re- sulted in a tightening of financial conditions over the pe- riod. The manager then discussed expectations regarding bal- ance sheet policy. Respondents to the Desk surveys ex- pected a slowing in the pace of balance sheet reduction to begin soon; the median respondent projected that the slowdown would start in June, one month earlier than in the March surveys. The average probability distribution of the size of the System Open Market Account (SOMA) portfolio at the end of runoff had become a bit more concentrated, and its probability-weighted mean was slightly lower than in the March surveys. Overall, the survey results suggested that respondents  expecta- tions for a slowdown of balance sheet runoff had been decoupled from expectations about the timing and ex- tent of rate cuts, and that respondents understood that a slowdown in the pace of runoff was not likely to trans- late to a higher terminal size of the portfolio. The manager then turned to money markets and Desk operations. Unsecured overnight rates were stable over the intermeeting period. In secured funding markets, rates on overnight repurchase agreements firmed some- what over the March quarter-end reporting date, in line with recent history. Market participants generally re- ported that the return of somewhat higher rates around reporting dates had not been associated with any issues in market functioning. Despite the ongoing balance sheet runoff, take-up at the overnight reverse repurchase agreement (