Federal Reserve Rates Update: Latest News and Forecasts 2023-2024

2023-12-13 19:46:07

US Federal Reserve Chairman Jerome Powell (Photo: Getty Images)

Washington — Status quo at the Fed which has, as expected, left its rates as they are, and plans to lower them several times in 2024, taking note of the slowdown in economic activity, and emphasizing that inflation remains “ high”.

The American central bank maintained its rates in a range of 5.25 to 5.50%, the highest in 22 years, a decision taken unanimously, according to a press release published after the meeting.

Its managers mainly anticipate three or four reductions next year, to bring them to 4.6% at the end of 2024.

Also read: Deals looks back on the rapid growth of the Fed’s key rate

“Recent indicators suggest that growth in economic activity has slowed since its solid pace in the third quarter,” commented the Fed’s monetary policy committee, the FOMC, after the meeting that began Tuesday morning.

Federal Reserve officials also note that “inflation has slowed over the past year, but remains high.”

Inflation should slow down a little faster than expected, falling to 2.4% at the end of 2024, according to updated forecasts, compared to 2.5% anticipated in the previous ones, in September. But we will have to wait until 2026 to see it return to the desired level of 2.0%.

As for growth, this year it will be stronger than initially expected, at 2.6% (compared to 2.1%), but should slow down more than expected next year, to 1.4% (compared to 1.5 %), and then accelerate again.

No change, however, for the unemployment rate, expected at 3.8% this year, and 4.1% in 2024.

Prudence

The president of the institution, Jerome Powell, should, however, during the press conference he will hold at 2:30 p.m., emphasize that it is too early to predict the moment when it will be appropriate to start lowering rates.

“It would be premature […] to speculate on when the policy might be relaxed,” he recently reminded, “this progress must continue if we are to reach our 2% target.”

He should also maintain a cautious tone, not ruling out the possibility of raising rates further if necessary, and postponing any discussion about when it will be appropriate to start lowering the cost of credit again.

The Fed had raised its rates 11 times since March 2022 to curb high inflation. However, it has not touched it since July, in order to observe the effects of these increases, and to avoid plunging the American economy into recession.

After soaring to levels not seen since the early 1980s, inflation is now on an upward slope.

It slowed to 3.1% year-on-year in November, according to the CPI index, and to 3.0% in October according to the PCE index, the one that the Fed wants to reduce to 2% – and for which data from November have not yet been published.

“By the end of 2024, the inflation index will surely start with the number 2”, that is to say that it will be between 2.00 and 2.9%, the Secretary of State anticipated on Wednesday. Treasure, Janet Yellen, on CNBC.

And the world’s largest economy seems well on its way to a “soft landing”, a drop in inflation without recession, she estimated.

“The employment situation still looks excellent and inflation is falling very quickly. And that’s exactly what we promised,” Chicago Fed President Austan Goolsbee also recently welcomed.