The Fed report
AGNC’s Take On The FOMC Policy Update
september 19, 2024
Yesterday, the Federal Open Market Committee (FOMC) released its statement and held a press conference following the conclusion of its September meeting.
FOMC Policy Updates: Key Highlights
- At its highly anticipated September meeting, the FOMC lowered the target range for the federal funds rate by 50 basis points to 4.75-5.00% “in light of the progress on inflation and the balance of risks.”
- This marks the Fed’s first rate cut since the Covid-fueled financial market dislocation in 2020 and the subsequent quantitative tightening cycle that began in early 2022, which increased the target range for the federal funds rate by over 500 basis points across 11 rate hikes in a little over two years.
- The Fed’s revised “dot plot” median expectations imply 50 basis points of additional rate cuts over the next two meetings to a median year-end 2024 forecast for the federal funds rate of 4.375%, as well as a cumulative 250 basis points of rate cuts by year-end 2026, inclusive of yesterday’s 50 basis point reduction.
- The decision to cut the federal funds rate by 50 basis points was not unanimous, as one Fed official voted for a 25 basis point reduction instead.
Our Take
- Chair Powell continued to reinforce the Fed’s commitment to its dual mandate – maximum employment and stable prices – with slightly greater emphasis on the labor market, a theme that first emerged at the July meeting.
- Chair Powell’s remarks emphasized that this 50 basis point reduction is a “recalibration of the Fed’s policy stance” intended to maintain strength in the economy and the job market and that, while yesterday’s decision marked the beginning of an easing cycle, the Fed is “not on any preset course” and will maintain its data-dependent approach to monetary policy decisions on a meeting-by-meeting basis.
- Although the Fed maintained the current pace of Treasury and Agency MBS runoff, we continue to expect the Fed to moderate the pace of balance sheet runoff by year-end.
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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