Status quo at the Fed for now

WASHINGTON – The status quo at the Fed, as expected, has kept its rates on hold and plans to cut them several times in 2024, noting the slowdown in economic activity and insisting that inflation remains “high.”

The American central bank kept 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 expect three or four cuts next year to bring it to 4.6% by the end of 2024.

Also Read: Agreements The rapid growth of the Fed’s key rate will see a return

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

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

Inflation will ease slightly faster than expected, falling to 2.4% by the end of 2024, according to updated estimates, up from a previous estimate of 2.5% in September. But we have to wait till 2026 for it to return to the desired level of 2.0%.

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

However, there is no change in the unemployment rate, at 3.8% this year and 4.1% in 2024.

Be careful

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

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

He, too, should maintain a cautious tone, not rule out the possibility of raising rates further if necessary, and postpone any discussion of when it might be appropriate to cut the cost of credit again.

The Fed has hiked rates 11 times since March 2022 to curb high inflation. However, it has not been touched since July to observe the effects of these increases and avoid pushing the American economy into recession.

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

The CPI index fell to 3.1% year-on-year in November and the PCE index fell to 3.0% in October, which the Fed wants to cut to 2% — and data from November has yet to be published.

“By the end of 2024, the inflation index will necessarily start at number 2”, meaning it will be between 2.00 and 2.9%, the Secretary of State predicted on Wednesday. Treasure, Janet Yellen, on CNBC.

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

“The employment situation is still excellent and inflation is coming down very quickly. And that’s what we promised,” Chicago Fed President Aston Goolsby also recently welcomed.

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