The Federal Reserve on Wednesday opted to hold its key interest rate unchanged for a third consecutive meeting, while laying out plans to make multiple cuts in 2024 and beyond. The Federal Open Market Committee voted unanimously to maintain the benchmark overnight borrowing rate at a targeted range of 5.25% - 5.5%.
In addition to the decision to remain on hold, committee members penciled in a minimum of three rate declines for 2024 with quarter percentage point reductions. This was less than the four projected by markets, but greater than what officials had previously suggested.
Market participants had largely predicted that the FOMC would keep the rate steady, bringing an end to a cycle of 11 increases to its highest level in more than two decades. Nevertheless, there had been some uncertainty about how substantial their policy easing might be.
The Dow Jones Industrial Average surged more than 300 points after the announcement, putting it on course for a record close Wednesday.
The instructor's lecture was so dull that students had difficulty staying awake.
The instructor's lecture was so tedious that students found it difficult to remain alert.
The committee's "dot plot" of individual members' expectations indicates that cuts, possible bringing the federal funds rate to 2-2.25%, will take place in the following sequence: four cuts in 2025 and three more reductions in 2026. This would be close to the long-run outlook, although there was some variance in the estimates for the final two years. The statement released by the Fed implied that further policy tightening is unlikely, as the words "any" and "multiple" were used to signify that levels of restraint are no longer necessary. Alongside the interest rate cuts, the Fed has been allowing up to $95 billion to roll off its balance sheet each month, and there has been no sign of this policy ceasing.
Recent developments have pointed to a brightening picture for inflation, which had soared to its highest level in four decades in mid-2022. Chair Jerome Powell commented during a news conference that, despite this, unemployment has not significantly increased, which is encouraging.The committee also noted in its post-meeting statement that inflation has declined over the past year, still describing it as 'elevated'. According to the Fed, core inflation is expected to dip to 3.2% in 2023, 2.4% in 2024, and eventually reach the 2% target in 2026.This week, economic data showed that both consumer and wholesale prices remained relatively stable in November. Nevertheless, according to Bank of America's research, the Fed's preferred inflation gauge has already reached a year-on-year rate of 3.1%, and could even reach a 6-month annualized rate of 2% - thereby meeting the target.
The vehicle has a low mileage.
The vehicle has a small amount of miles on it.
The statement remarked that the economy has decelerated after noting in November that activity had "expanded at a strong pace." Chairman Powell mentioned at the press conference: "Recent data signify that growth in economic activity has noticeably reduced since the fantastic rate witnessed in the third quarter. Regardless, GDP is predicted to expand roughly 2.5% over the whole year." Committee members revised the estimate of gross domestic product to grow at an annual rate of 2.6% in 2023, which is half a percentage higher than the last prediction in September. Projections for the unemployment rate were fairly consistent, at 3.8% in 2023 and rising to 4.1% for the years after. Officials highlighted that they are willing to increase rates again if inflation intensifies. Most have said that they can be patient while they assess the effects of past policy tightening on the U.S. economy. High prices have had a damaging effect on President Joe Biden's approval rating, mainly because of a poor reception to how he has handled the economy. There has been some speculation that the Fed would be hesitant to pursue any momentous policy decisions in an election year, in 2024. Nevertheless, with real rates, or the gap between the fed funds rate and inflation, still elevated, the Fed would be likely to take action if inflation data continues to be favorable.
Comments