It’s likely hard for many to believe, but we’re almost through the first quarter of 2024. Despite this, the Federal Reserve has not made a move to cut interest rates so far. The meeting set today delivered no relief either, though there are still expectations to do so before the end of the year hits. The key federal interest rate will remain stable at 5.5%, which constitutes the fifth consecutive push to leave rates exactly where they are.
That’s got some rather concerned, as the Federal Reserve only has eight scheduled meetings for 2024, with only six meetings left in which to stage three rate cuts. The rationale is reasonable enough; prices are still on the rise, even beyond the level that the Fed wants to see. That’s particularly true for regular Americans, who don’t want to just see prices go up 2.2% per year but want some price reductions against the catastrophic inflation they’ve already seen.
A Dangerous Game
Meanwhile, the Fed is actively playing chicken with the larger economy. Cutting rates too soon would reignite inflation, which is already cripplingly high as it is, and going up just a little bit over previously-elevated levels doesn’t really do anyone much good. However, keeping rates too high for too long strangles the economy itself, making lending difficult and making interest rates on things like car loans and mortgages that much higher.
While Fed chair Jerome Powell justifies the “pain” that Americans feel under high-interest rates, he seems comparatively oblivious to the “pain” they’re feeling from soaring inflation as well. With the risk of a recession rising under higher interest rates—not to mention the rising number of layoffs we’ve already seen—the end result isn’t great for the broader economy.
Is the SPDR S&P 500 ETF Trust Worth It?
Turning to Wall Street, analysts have a Moderate Buy consensus rating on the SPDR S&P 500 ETF Trust (NYSEARCA:SPY) based on 390 Buys, 107 Holds, and seven Sells assigned in the past three months, as indicated by the graphic below. After a 31% rally in its share price over the past year, the average SPY price target of $563.20 per share implies 8.31% upside potential.
