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US Fed Policy: FOMC keeps key rates steady at 22-year high-mark in last verdict of 2023, signals end of rate hikes
- US Federal Reserve Policy: Rate-setting FOMC led by Fed Chair Powell voted to keep the key interest rates unchanged at 5.25-5.5 per cent for the third straight meeting.
The US Federal Reserve announced its interest rate decision today after a two-day Federal Open Market Committee (FOMC) meeting, leaving the benchmark interest rates unchanged at 5.25 per cent - 5.50 per cent for the third straight meeting, in line with Street estimates.
The Fed's decision to keep its key interest rate at the same 22-year high mark lets policymakers determine the extent of any additional policy firming that may be appropriate," the US central bank said in a statement. The Fed added that inflation "has eased over the past year but remains elevated," and would watch the economy to see if "any" additional rate hikes are needed.
US Fed Chairman Jerome Powell-led FOMC was widely expected to keep the interest rate unchanged after having imposed the fastest string of rate hikes in four decades to fight stubbornly high inflation. Policymakers expect no further interest-rate hikes in their projections for the first time since March 2021.
Check live updates: Powell-led FOMC keeps key interest rates unchanged at 5.25-5.50%, signals 3 cuts in 2024
The members of the rate-setting panel also cut the median projection for interest rates at the end of next year to the midpoint between 4.50 and 4.75, signaling they now expect 0.75 percentage points or 75 basis points of cuts from the current levels next year. At 25 basis points per cut, this would translate to three rate cuts in 2024.
In a post-policy press conference, Fed Chair Jerome Powell said that the US Federal Reserve is now turning focus to when to cut rates as inflation continues its descent toward their 2 per cent goal.
Still, Powell acknowledged that officials at this week’s meeting discussed the question of when it will become appropriate to begin cutting rates. "While we believe our policy rate is at or near its peak for the tightening cycle, the economy has surprised forecasters," Powell said.
‘’Because of the unpredictable nature of the economy, he said that while Fed officials "do not view it as likely to be appropriate to raise interest rates further, neither do they want to take the possibility off the table" if it's needed,'' he said.
Previously, policymakers in the US had been pushing back against the market narrative of an aggressive monetary easing next year as inflation remains stubborn in the world’s top economy.
FOMC economic projections
In its quarterly projections, the Fed's policymakers now expect “core" inflation, according to its preferred measure, to fall to just 2.4 per cent by the end of 2024, down from a 2.6 per cent forecast in September. Core inflation, which excludes volatile food and energy costs, is considered a better gauge to inflation’s future path.
The FOMC expects the US economy to grow by 2.6 per cent this year, up from 2.1 per cent in September, before slowing down to 1.4 per cent in 2024. Despite the Fed's aggressive policy of monetary tightening, the world's biggest economy grew at an annualized rate of 5.2 per cent in the third quarter of this year.
Policymakers lowered their forecast for economic growth slightly for next year while keeping unemployment projections unchanged. The unemployment rate seen rising from the current 3.7 per cent to 4.1 per cent, the same rate projected in September.
The Fed, which has a dual mandate to tackle both inflation and unemployment, is the first major central bank to unveil its interest rate decision this week. The European Central Bank and the Bank of England will publish their own rate decisions on Thursday, and are also expected to hold their key lending rates in the face of slowing inflation.
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Business NewsEconomyUS Fed Policy: FOMC keeps key rates steady at 22-year high-mark in last verdict of 2023, signals end of rate hikes
First Published:14 Dec 2023, 12:43 AM IST
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