Timely & Relevant News: FOMC Recap

6/16/23 - As expected, the Federal Open Market Committee (FOMC) kept rates unchanged at its recent meeting but communicated a hawkish bias towards future interest rate decisions. With a slight tweak, the FOMC statement was modestly hawkish and communicated to investors that the committee is data-dependent when “determining the extent of additional policy firming that may be appropriate.” They do not say more tightening “will” be appropriate.

Along with the statement, four times a year, the Committee updates it Summary of Economic Projections (SEP), which is arguably more important than the statement. Within the most recent SEP, most policy makers believe further tightening is needed unless conditions materially weaken. Additionally, forecasts for GDP growth this year were revised higher since growth in the first quarter was so strong. The economy could still slide into recession in the latter half of this year and approach 1% growth for the entire year.

One scenario that could develop would put the economy in a mild recession by the end of the year as consumers retrench and businesses slow hiring as surveys suggest. Unemployment is expected to rise from current levels but will not likely increase as much as Federal Reserve (Fed) officials originally forecasted. Importantly, the Fed recognizes the ongoing economic resiliency and it doesn’t expect things to get as bad as originally forecasted three months ago, which bodes well for the soft-landing scenario if the Fed is right.

Markets did respond favorably after the anticipated and recent announcement by the Fed to pause rate hikes for the month of June.  Investors should anticipate some volatility as future rate hikes aren't completely off the table.

Our Covenant Wealth Strategies' Investment Team is closely monitoring a variety of signals and indicators to make wise and appropriate investment decisions. While we anticipate near-term market volatility, there is a chance that the markets could rally into the end of the year. 

If you have specific questions or would like to discuss your own investment strategy or financial planning needs, we welcome you to call us at 302.234.5655 or email us at contactus@covenantwealthstrategies.com to set up time to discuss further.

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