The Fed report

AGNC’s Take On The FOMC Policy Update
AUGUST 1, 2024

Yesterday, the Federal Open Market Committee (FOMC) released its statement and held a press conference following the conclusion of its July meeting.

FOMC Policy Updates: Key Highlights

  • The Committee voted unanimously to maintain the target range for the Federal Funds Rate at 5.25-5.50% for the eighth consecutive meeting.
  • The Committee’s tone on inflation, however, was more positive, as it acknowledged that inflation is now only “somewhat” elevated. In addition, the statement noted that there has been “some further progress” toward the Committee’s 2% inflation objective, an improvement from the “modest further progress” and “lack of further progress” language used in the June and May statements, respectively.
  • Notably, the Committee highlighted that it is now “attentive to the risks to both sides of its dual mandate” – maximum employment and stable prices – rather than highlighting only inflationary risks as in previous statements.
  • The FOMC also reiterated that it does not expect to cut rates until “it has gained greater confidence that inflation is moving sustainably toward 2%.”

Our Take

  • While Chair Powell reiterated the Fed’s data-dependent approach to monetary policy, he also conveyed a dovish tone during the press conference.
  • The Chair’s remarks provide a clear signal that the Committee expects to move toward a less restrictive monetary policy stance in the coming months.
  • Consistent with the press conference remarks, the market is pricing in a near 100% probability of a 25 basis point rate cut in September and a high probability of an additional 25 basis point rate cut at each of the November and December meetings. 
  • Importantly, Chair Powell also noted that while unemployment remains low by historical measures, material further weakness in the labor market would not be a welcome development from his perspective. 

Important Disclosures
The thoughts, opinions, and outlook contained in the “Our Take” section are solely those of AGNC Investment Corp. (“AGNC”) management and are being shared for informational purposes only and should not be construed as investment advice. Neither the Federal Reserve nor any other third party has contributed to or been involved in AGNC’s preparation of these materials. AGNC does not endorse or adopt the views of the Federal Reserve or any third party.

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