Where the markets are ahead of the Fed’s rate decision
The three major averages hovered near the flat line as investors braced for the Federal Reserve’s interest rate decision.
The S&P 500 was down 0.06%, while the Nasdaq Composite was down 0.08%, as of 1:36 p.m. ET. The Dow Jones Industrial Average was down about 6 points, or 0.02%.
S&P 500 intraday action
Bond yields also remained flat ahead of the Fed announcement. The 2-year Treasury rate fell less than 2 basis points to 4.675%. The 10-year yield also fell less than 2 basis points to 4.279%.
–Darla Mercado
Never mind the interest rate policy. Focus on the Fed’s balance sheet
The central bank’s stance on interest rates and how it will proceed is the focus of investors, but don’t forget the Fed’s balance sheet cleanup.
The central bank has used up $7.6 trillion in Treasurys, mortgage-backed securities and other assets — and may soon taper off and eventually end its balance sheet shrinking. The Fed currently allows up to $60 billion a month in Treasurys to draw off its balance sheet without reinvesting, along with up to $35 billion in mortgage-backed securities.
Investors will hear about details on how the Fed will go about cleaning up its balance sheet, a topic that Fed Chairman Powell may address during his press conference.
Read more here from CNBC’s Jeff Cox on the Fed’s balance sheet.
–Darla Mercado, Jeff Cox
Where consumer interest rates have been since the Fed began tightening policy
It’s been two years since the Federal Reserve first raised interest rates this last cycle, and the move has had a significant impact on consumers’ wallets.
Since the Fed began raising rates in March 2022, borrowers have had to pay more in interest. During the week of March 11, 2022, a 30-year fixed mortgage rate was 4.29%, compared with 7.09% on March 15, 2024, according to MND.
Carrying debt into a credit card balance has also become more expensive, with the annual rate rising to 20.75% from 16.34% since the Fed took its toughest stance about two years ago, according to Bankrate.
Although times have gotten tougher for borrowers, savers and fixed income investors are reaping the benefits of higher interest rates.
For starters, the 2-year note is now yielding 4.67%, compared with 1.75% in March 2022, according to Refinitiv. Parking cash in a certificate of deposit has also become more rewarding, with annual percentage yields on 6-month CDs rising to 3.298% from 0.22%, according to Lending Tree.
–Darla Mercado, Nick Wells
Fed rate expectations will be key on Wednesday
Central bank policymakers are widely expected to support interest rates when they conclude their policy meeting in March, but the dot plot will be the main event for traders.
The policy-setting Federal Open Market Committee will release its dot chart, a breakdown of individual members’ expectations for interest rates going forward.
Investors entered 2024 with an optimistic outlook for rate cuts, expecting the Fed to cut rates six or seven times in quarterly percentage point increments. But those expectations have come true, with investors now expecting interest rates to fall first in June and forecast just three cuts.
The change in the Street’s forecast comes as economic data shows that inflation is proving harder to reverse than many had hoped.
Read more from CNBC’s Jeff Cox on what to expect from the Fed meeting.
–Darla Mercado