Fed keeps rates steady, plans 3 cuts in 2022
OAN’s James Meyers
3:15 PM – Wednesday, December 13, 2023
The Federal Reserve Keeps Interest Rate Predictions Unchanged, Indicating Possible Slowdown in Inflation
Policymakers had just recently forecast a series of cuts in 2024.
The decision left interest rates alone at a range of 5.25% to 5.5%, which is the highest level in 22 years. Lawmakers left the door open to multiple rate cuts next year, with signs showing the economy is beginning to slow down.
Economic projections showed how Fed officials expect rates to fall to 4.6% by the end of 2024, which suggests that there will be at least three quarter-point rate cuts next year.
Additionally, policymakers also said that there will be additional rate cuts in the years 2025 and 2026. However, officials claim that they do not see rates rising further next year in 2024.
After the decision, stocks surged and bond yields fell with the Dow Jones Industrial Average, topping 37,000 for the first time ever.
“We added the word ‘any’ as an acknowledgment that we are likely at, or near, the peak rate for this cycle,” Fed Chair Jerome Powell told reporters at the post-meeting press conference in Washington. “But participants also didn’t want to take the possibility of further hikes off the table.”
The move comes after policymakers raised interest rates 11 times since March 2022, in hopes of lowering inflation.
The higher rates have caused the average rate on 30-year mortgages above 8% for the first time in decades. While economists have claimed that inflation has gone down in recent months, it still remains up 3% compared with the same time a year ago, according to the most recent Labor Department data.
“The major takeaway from the December policy meeting is that the Federal Reserve is forecasting a soft landing, full employment and intends to reduce its federal funds policy rate by at least 75 basis points in 2024 to support the ongoing business expansions,” said Joe Brusuelas, RSM chief economist.
“And from our vantage point that is about the best holiday gift a central banker can bestow upon the investment community, policymakers, and the public.”
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How does the Federal Reserve’s decision to keep interest rate predictions unchanged reflect their cautious approach to current economic conditions?
The Federal Reserve, the central bank of the United States, recently announced that it will keep interest rate predictions unchanged, indicating a possible slowdown in inflation. This decision comes after policymakers had previously forecast a series of cuts in 2024. The interest rates will remain at a range of 5.25% to 5.5%, which is the highest level in 22 years.
However, the Federal Reserve left the door open for multiple rate cuts next year, as signs show the economy is starting to slow down. Economic projections suggest that rates will fall to 4.6% by the end of 2024, indicating at least three quarter-point rate cuts in the coming year. Policymakers also mentioned the possibility of additional rate cuts in 2025 and 2026. However, they emphasized that they do not foresee rates rising further in 2024.
After the announcement, stocks surged and bond yields fell. The Dow Jones Industrial Average surpassed 37,000 for the first time ever. This indicates that investors are optimistic about the Federal Reserve’s decision to potentially lower interest rates in the future.
In a statement, Fed Chair Jerome Powell acknowledged that they may be nearing the peak rate for this cycle. However, he also mentioned that participants did not want to eliminate the possibility of further rate hikes. Powell emphasized the importance of ongoing progress towards the inflation target of 2%.
The decision to keep interest rates unchanged comes after policymakers raised rates 11 times since March 2022, aiming to curb inflation. These higher rates have led to an average rate of above 8% for 30-year mortgages, a level not seen in decades. While there has been a decrease in inflation in recent months, it remains up 3% compared to the same time the previous year, according to the latest Labor Department data.
Joe Brusuelas, RSM chief economist, commented on the December policy meeting, stating that the Federal Reserve is forecasting a soft landing and full employment. He also mentioned that the Federal Reserve intends to reduce its federal funds policy rate by at least 75 basis points in 2024 to support ongoing business expansions.
The Federal Reserve’s decision to keep interest rate predictions unchanged reflects the cautious approach they are taking in response to the current economic conditions. As inflation remains a concern, the Federal Reserve aims to strike a balance between supporting economic growth and managing inflationary pressures. This decision will have implications for businesses, consumers, and investors alike, as they adjust their strategies based on the Federal Reserve’s outlook for interest rates in the coming months.
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