Market Call: The Fed Put Is Back

Last week, the FOMC released its latest quarterly Summary of Economic Projections (SEP) for March. Compared to December's SEP, the committee's participants raised their 2024 median forecasts for real GDP (from 1.4% to 2.1%) and for the core PCED inflation rate (from 2.4% to 2.6%). Their median forecast for the unemployment rate was lowered a bit from 4.1% to 4.0%.

So they think that the economy will be stronger with slightly higher inflation this year. Yet they didn't change their projection of three 25bps cuts in the federal fund rate this year. That suggests that the Fed Put is back. In their collective opinion, Powell & Co. seem to agree that inflation is close enough to their 2.0% target that they should err on the side of easing to avert a recession which has been a no-show since early 2022. Stock investors love the Fed Put (chart)!