Feds still not budging on the discount rate
Not unsurprising, the Feds' Powell announced no change in the discount rate for this month. For that matter, the projection is for just one reduction in the discount rate for 2024.
According to Powell, whereas there was some news that would be encouraging for a reduction in the discount rate, it is not enough. Powell says the fact the Feds have pulled back on the discount rate reductions for 2024 (one cut vs three), it could just mean more cuts in 2025.
The two biggest factors affecting stubborn inflation numbers are rental prices and auto insurance. Most folks with car insurance can attest to the rapid increase in insurance premiums. One would think eventually it would peak.
Until the Feds see reasons for reducing the discount rate, our long term interest rates appear to stay elevated. When the discount rate drops, it does not mean the same reduction in long term interest rates, it simply implies the economy is slowing; that in turn will affect long term rates. Today, that appears to be not happening in 2024, however, change seems to be eternal with these matters, so stay tuned.
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