Explore our services

Wealth Planning
Receive a multigenerational wealth plan with personalized strategies and guidance.
Investing
Experience a holistic approach to investing, centered on your goals and priorities.
Lending
Unlock liquidity with a variety of customized lending products, strategies and solutions.
Banking
Access a variety of banking products and services tailored to your needs.
Family wealth platform
Explore our platform of specialized services designed for ultra-high-net-worth clients.

May 2024 Fed meeting: Rates hold steady

May 03, 2024

The Federal Reserve held rates steady and described an uncertain path toward rate cuts in 2024. Read more about the implications of the Fed’s latest decision.

Key takeaways

During its May meeting, the Federal Reserve unanimously voted to hold policy rates steady for the sixth consecutive time, leaving the federal funds target rate unchanged at 5.25% to 5.5%.
Chair Jerome Powell acknowledged the hot first-quarter inflation data, stating that it will likely take longer than anticipated for the Fed to gain confidence that the economy is on a sustainable path toward 2% inflation. He reiterated his view that the Fed’s current stance is appropriately restrictive.
An important development in the presser came when Powell emphasized it’s unlikely that the next policy rate move will be a hike.
The Fed also confirmed that it would begin to slow the pace of reducing the size of its balance sheet starting in June.

Contributors

John Veit

The Federal Reserve announced at its May 2024 Federal Open Market Committee (FOMC) meeting that it would maintain the overnight federal funds rate at the current range of 5.25% to 5.5%.¹ This decision marks the sixth consecutive meeting at which policymakers have opted to hold rates steady and keeps the federal funds rate at the highest target range in over 23 years.²

The Fed remains committed to its dual goals of bringing inflation down to its 2% target to maintain price stability and achieving maximum employment. Economic growth and inflation are too high for the Fed to consider cutting rates. As the FOMC fights to restore price stability, it acknowledges that these high rates have taken a toll on consumers by eroding their purchasing power.

As expected, the FOMC reiterated that the economy continues to grow at a healthy pace, as recent economic data has shown strong job gains and a low unemployment rate. On a positive note, the FOMC highlighted that the risks and balance between jobs and inflation have improved.³

Chair Jerome Powell acknowledged the hot first-quarter inflation data, stating that it will likely take longer than anticipated for the Fed to gain confidence that the economy is on a sustainable path toward 2% inflation. He reiterated his view that the Fed’s current stance is appropriately restrictive.

Likewise, May’s FOMC statement noted that in recent months, there has been a lack of further progress toward the Fed’s inflation target.⁴ This led the committee to raise their longer-term inflation and growth expectations.

A softer run-off pace of security holdings

The Fed confirmed that starting in June, it would slow the rate at which it’s reducing the size of its balance sheet.

The Fed expects to lower the Treasury securities monthly redemption cap from $60 billion to $25 billion, a slower-than-expected change in pace. In addition, the Fed will maintain the agency debt and agency mortgage-backed securities monthly redemption cap at $35 billion. The Fed “will reinvest any principal payments in excess of this cap into Treasury securities.”⁵

This reduction in the balance sheet runoff is seen as a first step toward a more accommodating monetary policy, as the slowed runoff effectively means that the Fed is lowering the pace at which it is withdrawing liquidity from the system.

An uncertain path forward

As ongoing economic progress is not assured, Powell emphasized that the path forward is “uncertain.”⁶ May’s FOMC meeting left open the exact timing of potential rate cuts.

When asked about the extent of cuts, Powell reiterated that all decisions will depend on the upcoming data and be made on a meeting-to-meeting basis. Going forward, Powell emphasized the Fed will “carefully assess incoming data, the evolving outlook and the balance of risks.”⁷

We don’t expect the Fed to start cutting rates until later this year given stable economic growth and sticky inflation, and we’d need to see a meaningful reversal in growth to spur the Fed toward rate hikes. This buys the Fed more time to be patient, supporting our view that interest rates will be higher for longer.

Powell said he remains prepared to maintain the policy rate at current levels for longer if necessary, until the Fed has greater confidence that inflation has meaningfully lowered. When asked if we’ve reached peak rates, Powell responded that he does not know – the answer is data-dependent. Powell added that the Fed needs to see inflation move closer to 2% and the labor market cool down before considering rate cuts.⁸

Market reaction

U.S. equities were mixed and little changed in the afternoon following the Fed’s announcement on May 1, with the S&P 500 declining by 0.3% that day. Simultaneously, the Dow Jones Industrial Average rose 0.2% and the Nasdaq fell 0.3%.

Market observers and participants largely anticipated that the central bank would keep rates at current levels given March’s hotter-than-expected labor market data and stickier-than-expected inflation. Investor sentiment received a slight and short-lived boost after the FOMC meeting, as it offered little surprise in its decision to keep rates unchanged. Nevertheless, there is still the expectation that there could be rate cuts later this year.

References

Board of Governors of the Federal Reserve System, “Federal Reserve Issues FOMC Statement.” (May 2024)

Board of Governors of the Federal Reserve System, “Transcript of Chair Powell’s Press Conference Opening Statement” (May 2024).

Board of Governors of the Federal Reserve System, “Federal Reserve Issues FOMC Statement.” (May 2024)

Ibid.

Board of Governors of the Federal Reserve System. “Transcript of Chair Powell’s Press Conference Opening Statement” (May 2024).

Ibid.

Connect with a Wealth Advisor

Our Wealth Advisors begin by getting to know you personally. To get started, tell us about your needs and we’ll reach out to you.

Connect now

IMPORTANT INFORMATION

This material is for informational purposes only, and may inform you of certain products and services offered by J.P. Morgan’s wealth management businesses, part of JPMorgan Chase & Co. (“JPM”). Products and services described, as well as associated fees, charges and interest rates, are subject to change in accordance with the applicable account agreements and may differ among geographic locations. Not all products and services are offered at all locations. If you are a person with a disability and need additional support accessing this material, please contact your J.P. Morgan team or email us at accessibility.support@jpmorgan.com for assistance. Please read all Important Information.

GENERAL RISKS & CONSIDERATIONS. Any views, strategies or products discussed in this material may not be appropriate for all individuals and are subject to risks. Investors may get back less than they invested, and past performance is not a reliable indicator of future results. Asset allocation/diversification does not guarantee a profit or protect against loss. Nothing in this material should be relied upon in isolation for the purpose of making an investment decision. You are urged to consider carefully whether the services, products, asset classes (e.g. equities, fixed income, alternative investments, commodities, etc.) or strategies discussed are suitable to your needs. You must also consider the objectives, risks, charges, and expenses associated with an investment service, product or strategy prior to making an investment decision. For this and more complete information, including discussion of your goals/situation, contact your J.P. Morgan representative.

NON-RELIANCE. Certain information contained in this material is believed to be reliable; however, JPM does not represent or warrant its accuracy, reliability or completeness, or accept any liability for any loss or damage (whether direct or indirect) arising out of the use of all or any part of this material. No representation or warranty should be made with regard to any computations, graphs, tables, diagrams or commentary in this material, which are provided for illustration/reference purposes only. The views, opinions, estimates and strategies expressed in this material constitute our judgment based on current market conditions and are subject to change without notice. JPM assumes no duty to update any information in this material in the event that such information changes. Views, opinions, estimates and strategies expressed herein may differ from those expressed by other areas of JPM, views expressed for other purposes or in other contexts, and this material should not be regarded as a research report. Any projected results and risks are based solely on hypothetical examples cited, and actual results and risks will vary depending on specific circumstances. Forward-looking statements should not be considered as guarantees or predictions of future events.

Nothing in this document shall be construed as giving rise to any duty of care owed to, or advisory relationship with, you or any third party. Nothing in this document shall be regarded as an offer, solicitation, recommendation or advice (whether financial, accounting, legal, tax or other) given by J.P. Morgan and/or its officers or employees, irrespective of whether or not such communication was given at your request. J.P. Morgan and its affiliates and employees do not provide tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any financial transactions.

Legal Entity and Regulatory Information.

J.P. Morgan Wealth Management is a business of JPMorgan Chase & Co., which offers investment products and services through J.P. Morgan Securities LLC (JPMS), a registered broker-dealer and investment adviser, member FINRA and SIPC. Insurance products are made available through Chase Insurance Agency, Inc. (CIA), a licensed insurance agency, doing business as Chase Insurance Agency Services, Inc. in Florida. Certain custody and other services are provided by JPMorgan Chase Bank, N.A. (JPMCB). JPMS, CIA and JPMCB are affiliated companies under the common control of JPMorgan Chase & Co. Products not available in all states.

Bank deposit accounts and related services, such as checking, savings and bank lending, are offered by JPMorgan Chase Bank, N.A. Member FDIC.

This document may provide information about the brokerage and investment advisory services provided by J.P. Morgan Securities LLC (“JPMS”). The agreements entered into with JPMS, and corresponding disclosures provided with respect to the different products and services provided by JPMS (including our Form ADV disclosure brochure, if and when applicable), contain important information about the capacity in which we will be acting. You should read them all carefully. We encourage clients to speak to their JPMS representative regarding the nature of the products and services and to ask any questions they may have about the difference between brokerage and investment advisory services, including the obligation to disclose conflicts of interests and to act in the best interests of our clients.

J.P. Morgan may hold a position for itself or our other clients which may not be consistent with the information, opinions, estimates, investment strategies or views expressed in this document. JPMorgan Chase & Co. or its affiliates may hold a position or act as market maker in the financial instruments of any issuer discussed herein or act as an underwriter, placement agent, advisor or lender to such issuer.

Check the background of our firm and investment professionals on FINRA's BrokerCheck

To learn more about J. P. Morgan’s investment business, including our accounts, products and services, as well as our relationship with you, please review our J.P. Morgan Securities LLC Form CRS and Guide to Investment Services and Brokerage Products.

This website is for informational purposes only, and not an offer, recommendation or solicitation of any product, strategy service or transaction. Any views, strategies or products discussed on this site may not be appropriate or suitable for all individuals and are subject to risks. Prior to making any investment or financial decisions, an investor should seek individualized advice from a personal financial, legal, tax and other professional advisors that take into account all of the particular facts and circumstances of an investor's own situation.

This website provides information about the brokerage and investment advisory services provided by J.P. Morgan Securities LLC ("JPMS"). When JPMS acts as a broker-dealer, a client's relationship with us and our duties to the client will be different in some important ways than a client's relationship with us and our duties to the client when we are acting as an investment advisor. A client should carefully read the agreements and disclosures received (including our Form ADV disclosure brochure, if and when applicable) in connection with our provision of services for important information about the capacity in which we will be acting.

INVESTMENT AND INSURANCE PRODUCTS ARE: • NOT FDIC INSURED • NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY • NOT A DEPOSIT OR OTHER OBLIGATION OF, OR GUARANTEED BY, JPMORGAN CHASE BANK, N.A. OR ANY OF ITS AFFILIATES • SUBJECT TO INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF THE PRINCIPAL AMOUNT INVESTED

J.P. Morgan Wealth Management is a business of JPMorgan Chase & Co., which offers investment products and services through J.P. Morgan Securities LLC (JPMS), a registered broker-dealer and investment adviser, member FINRA and SIPC Insurance products are made available through Chase Insurance Agency, Inc. (CIA), a licensed insurance agency, doing business as Chase Insurance Agency Services, Inc. in Florida. Certain custody and other services are provided by JPMorgan Chase Bank, N.A. (JPMCB). JPMS, CIA and JPMCB are affiliated companies under the common control of JPMorgan Chase & Co. Products not available in all states.

Please read additional Important Information in conjunction with these pages.

Key takeaways

Contributors

References

Connect with a Wealth Advisor

SHOW MORE

Related insights