Fed Signals Hold on Interest Rates, Projects Cuts in 2024 Amid Economic Uncertainty

The Federal Reserve has opted to maintain its current policy interest rate, signaling a pause in rate hikes and indicating potential cuts in 2024. This decision reflects the central bank’s ongoing commitment to achieving its dual mandate of maximum employment and price stability. Despite inflation easing from prior highs, the Fed stresses that the path forward remains uncertain and that further progress in reducing inflation is not guaranteed. The Fed’s policy rate is now well into restrictive territory, exerting downward pressure on economic activity and inflation.

  • The Federal Reserve has left its policy interest rate unchanged, continuing its security holdings reduction.
  • Inflation has declined from its peaks without a significant rise in unemployment, but it remains above the 2% target.
  • The Fed has raised the policy interest rate by 5.25 percentage points since early last year.
  • Economic activity growth has slowed, with GDP projected to expand around 2.5% for the year, supported by strong consumer demand.
  • The labor market remains tight with rebalancing expected to continue, easing inflation pressures.
  • Median unemployment rate projections rise to 4.1% by the end of the next year.
  • Total PCE prices rose 2.6% and core PCE prices 3.1% over the 12 months ending in November.
  • Long-term inflation expectations seem well-anchored, with the process of reaching the 2% goal projected to take some time.
  • The median projection for the federal funds rate is 4.6% at the end of 2024, 3.6% at the end of 2025, and 2.9% at the end of 2026.
  • The Fed is committed to returning inflation to 2% but acknowledges the need for further evidence of a sustained decrease.
  • Monetary policy will adjust if the economy does not evolve as projected.

The Wall Street Journal is an American business and economic-focused international daily newspaper based in New York City. The Journal is published six days a week by Dow Jones & Company, a division of News Corp.

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