At the juncture Federal Open Market Committee (FOMC) and the Board of Governors of the Federal Reserve System said on the Developments in Financial Markets and Open Market Operations. The manager turned first to a review of developments in financial markets. Domestic data releases over the intermeeting period pointed to inflation being more persistent than previously expected and to a generally resilient economy.
Policy expectations shifted materially in response. The policy rate path derived from futures prices implied fewer than two 25 basis point rate cuts by year-end. The modal path based on options prices was quite flat, suggesting at most one such rate cut in 2024.
The median of the modal paths of the federal funds rate obtained from the Open Market Desk’s Survey of Primary Dealers and Survey of Market Participants also indicated fewer cuts this year than previously thought. Respondents’ baseline expectations for the timing of the first rate cut—which had been concentrated around June in the March surveys—shifted out significantly and became more diffuse.
At the conclusion of the discussion, the Committee voted to direct the Federal Reserve Bank of New York, until instructed otherwise, to execute transactions in the SOMA in accordance with the following domestic policy directive. Effective May 2, 2024, the Federal Open Market Committee directs the Desk to,
1: Undertake open market operations as necessary to maintain the federal funds rate in a target range of 5-1/4 to 5-1/2 percent.
2: Conduct standing overnight repurchase agreement operations with a minimum bid rate of 5.5 percent and with an aggregate operation limit of $500 billion.
3: Conduct standing overnight reverse repurchase agreement operations at an offering rate of 5.3 percent and with a per-counterparty limit of $160 billion per day.
Roll over at auction the amount of principal payments from the Federal Reserve’s holdings of Treasury securities maturing in May that exceeds a cap of $60 billion per month. Beginning on June 1, roll over at auction the amount of principal payments from the Federal Reserve’s holdings of Treasury securities maturing in each calendar month that exceeds a cap of $25 billion per month.
