ELIZABETH COOK:
00:00:00
All right, let's take a live look at the big board at the New York Stock Exchange right now, as the markets react to the Federal Reserve's decision to hold interest rates steady. Looks like the Dow is down over 500 points. But let's take a look at our interactive stock market heat map brought to you by Finviz, showing the top 500 stocks. You can see a lot of red with a few little sprinklings of green there. Now, the decision to keep interest rates where they are was unanimous. New Federal Reserve Chair Kevin Warsh spoke about it during his first news conference in that role. Take a listen. My colleagues and I are here to serve our legislative remit, which you've heard us say before-- price stability and maximum employment. And these objectives guided our business in the meeting just concluded. As you saw a few moments ago, the committee decided to maintain the target range for the Fed funds rate at 3.5% to 3.75% in support of the Fed's dual mandate. Let's bring in CBS News MoneyWatch reporter Kelly O'Grady, live for us at the New York Stock Exchange. OK, Kelly, what do you make of the decision of the Fed to hold interest rates steady? Yeah, this was pretty expected, right? We've talked about this before. We have seen job growth, at least at that top-line level, be pretty decent over the past few months. And you have inflation at a three-year high. And so the Fed was, as expecting, focusing on that price growth. And they even mentioned it in the statement, that it was really this price pressure from what's going on in the Middle East and all of that uncertainty. Where I think it got interesting is that we got economic projections. You get them every couple of Fed meetings. At the March meeting, they were still pricing in an interest rate cut, one interest rate cut by the end of the year. Now, with how things have changed, obviously significantly since March with where inflation is, they're actually projecting an interest rate hike. And that, by the way, is exactly why the market lost quite a bit after that news came out and after that press conference. That doesn't mean that we are for sure going to get an interest rate hike. It's really going to depend a lot on how energy prices move over the back half of the year. But that was really the takeaway for me, that you have a situation where at least half of the folks in the room were feeling that, hey, there is price pressure. That's where we should be focusing. And in fact, by the end of the year, we're likely going to have to hike rates in order to do so. And Kelly, the Fed also released its summary of economic projects today. Can you walk us through what that could mean for interest rates a little later on this year? Yeah, so that's part of it, right? We could see a hike. Where I also thought it was interesting is they released projections for where inflation is going to be, where GDP growth is going to be, where the unemployment rate is going to be. GDP growth still expected to be quite good, anywhere in that 2% to 3% range, whether you're looking at 2026, 2027, or 2028, because they've released projections for all three. But in addition, they expect inflation to be above 3% by the end of the year. Now, we know it's certainly above 3% now. But again, it was a big departure from March. And it just shows you how big of a difference the Iran War, in the last few months, where energy prices have been pretty high, have impacted the Fed's thinking. The other piece of this is, yes, we got economic projections here. We got a press conference. We heard from Warsh. The Warsh era of the Fed started today. But there's a lot of remaining questions of whether we are going to see as much information from the Fed going forward. Warsh really emphasized that he feels sharing projections, predictions about where interest rates might be is not really productive because things, the data, everything is changing so quickly. So everything is status quo for right now, but it's a signal of things to come from him that we may not have as many press conferences. They may be looking at different data in the future. Kelly O'Grady, always great to see you. Thanks so much.
