Dec 15, 2023

Fed holds rates steady, indicates three cuts coming in 2024

The Federal Reserve maintained its key interest rate, holding it steady for the third consecutive time, between 5.25%-5.5%. This decision marks a pause in a series of 11 hikes that elevated the fed funds rate to its highest in over two decades. The Federal Open Market Committee (FOMC) voted unanimously for this hold, signaling a […] 
 Dec 15, 2023

Fed holds rates steady, indicates three cuts coming in 2024

The Federal Reserve maintained its key interest rate, holding it steady for the third consecutive time, between 5.25%-5.5%. This decision marks a pause in a series of 11 hikes that elevated the fed funds rate to its highest in over two decades. The Federal Open Market Committee (FOMC) voted unanimously for this hold, signaling a cautious approach amid easing inflation and a stable economy.

The Fed's move was largely anticipated by markets, which had factored in this pause. The decision led to a significant response in the stock market, with the Dow Jones Industrial Average surging past 37,000. However, the FOMC's outlook indicates a shift towards easing policy in the future, with at least three rate cuts projected for 2024, followed by additional reductions in 2025 and 2026. This trajectory aims to bring the fed funds rate closer to the long-run outlook, settling between 2%-2.25%.

Chair Jerome Powell acknowledged the easing of inflation from its peak in mid-2022, noting the decline without a significant rise in unemployment. The FOMC's statement echoed this sentiment, highlighting that inflation has "eased over the past year" while remaining "elevated." The Fed's projections see core inflation decreasing progressively over the next few years, aligning with their 2% target by 2026.

Interestingly, the statement hinted at the potential end of hikes, mentioning that the committee would consider multiple factors for "any" further policy tightening. Despite this, the Fed continues its policy of allowing up to $95 billion a month in maturing bond proceeds to roll off its balance sheet, indicating no immediate change in this area of policy tightening.

This strategic decision comes amidst a backdrop of a slowing economy, with GDP growth estimated to be around 2.5% for the year. The FOMC upgraded the GDP growth forecast for 2023 to 2.6% and maintained a stable outlook for the subsequent years. Unemployment projections remain relatively unchanged, with a slight increase expected in the coming years.

The Fed's stance reflects its readiness to hike rates again if inflation resurges but also shows a willingness to be patient and assess the impact of previous tightening measures on the economy. With the looming presidential election in 2024, the Fed's approach balances economic needs with the broader political landscape. This decision reflects the central bank's commitment to navigating the complex interplay of economic growth, inflation control, and market stability.

Find your merch

EYL MERCH

New Styles 2024

Shop EYL Merch and Assets over Liabilities Collections
Shop Now

RELATED NEWS

Shop EYL Merch

SHOP ALL >
Join The Earn Your Leisure Newsletter

Stay up-to-date with the latest news in Business, Investing and Real Estate.

*by clicking Subscribe you agree to our Terms of Service and Privacy Policy