’Don’t think it’s likely…’ US Fed Chair Jerome Powell on March rate cut: 10 key highlights from FOMC meeting outcome

  • US Fed Chair Jerome Powell said that ‘almost everyone’ on the 19-person FOMC was in favor of a cut in 2024, but that move was unlikely as soon as the next meeting in March.

Livemint
First Published1 Feb 2024, 06:57 AM IST
The FOMC unanimously decided to keep the Fed funds rate unchanged in the range of 5.25% - 5.50%, which is at the 23-year high.
The FOMC unanimously decided to keep the Fed funds rate unchanged in the range of 5.25% - 5.50%, which is at the 23-year high.(Photo: AP)

The US Federal Reserve on Wednesday decided to keep interest rates unchanged for the fourth straight meeting, as was widely expected. The Federal Open Market Committee (FOMC) unanimously voted to hold the policy rate at the 23-year high, in the range of 5.25% - 5.50%. This was the US central bank’s first policy-setting meeting of the year 2024. 

However, the Fed dashed hopes for an interest rate cut as early as March. It indicated it was moving toward future cuts, but probably not before May at the earliest.

Fed Chair Jerome Powell said that ‘almost everyone’ on the 19-person FOMC was in favor of a cut in 2024, but that move was unlikely as soon as the next meeting in March.

Read here: US Fed Meet Highlights: Powell-led FOMC keeps key rates unchanged at 5.25-5.50% for 4th straight meeting

Here are key highlights from the US Federal Reserve meeting outcome:

1. First verdict for 2024: The FOMC unanimously decided to keep the Fed funds rate unchanged in the range of 5.25% - 5.50%, which is at the 23-year high.

2. Fed’s dual mandate for rate cuts: The Fed has a dual mandate to keep both inflation and the unemployment rate low, and has been heavily focused on bringing high inflation back down towards its long-term target of 2%. 

3. No rate cut in March: The policymakers signal they are not yet ready to cut interest rates as soon as the next meeting in March. FOMC is unlikely to start cutting interest rates “until it has gained greater confidence that inflation is moving sustainably toward two percent.”

“I don't think it's likely that the committee will reach a level of confidence by the time of the March meeting to identify March as the time to cut,” Fed Chair Jerome Powell said.

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4. Officials in favour of rate cut: ‘Almost everyone’ on the 19-person FOMC was in favour of an interest rate cut in 2024, but that a move as soon as the next meeting in March was unlikely, Powell said.

5. Lending rate ‘likely at its peak’: The US central bank’s benchmark lending rate has probably reached a peak, Powell said.

“We believe that our policy rate is likely at its peak for this tightening cycle and that if the economy evolves broadly as expected, it will likely be appropriate to begin dialing back policy restraint at some point this year,” he told reporters at a press conference after the rate decision.

6. Economic projections: Fed officials did not issue new economic projections at their meeting. As of the December 12-13 meeting, policymakers envisioned cutting the policy rate by 75 basis points over the course of this year.

Economic activity “has been expanding at a solid pace,” the Fed said. Job gains “remain strong, and the unemployment rate has remained low,” it added.

“The economy is broadly normalizing, and so is the labor market,” Powell told reporters.

7. Fed’s Balance Sheet: Fed maintains its pace of quantitative tightening, with a maximum of $60 billion of Treasuries and $35 billion of mortgage-backed securities rolling off the balance sheet each month; statement doesn't give any hint of change to the program. However, Powell indicated an in-depth discussion will be held in March that leaves in place expectations for a framework for winding down balance sheet reduction.

Read Budget 2024 Live Updates here

8. Future path on inflation still uncertain: Powell said that the US economy has made some good progress, with inflation easing from its highs without signs of increased unemployment. Still, there is work to be done, he said. 

“Inflation is still too high, ongoing progress in bringing it down is not assured and the path forward is uncertain,” Powell said, according to CNBC. “I want to assure the American people we are fully committed to returning inflation to our two per cent goal.”

9. Unemployment remains low: The Fed said jobs gains have moderate but remained strong. Unemployment remains low, inflation has eased but remains elevated.

10. Next meet: US Fed Chair Powell-led FOMC will now meet on March 19-20 to deliberate for the next set of policy decisions.

(With inputs from Agencies)

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First Published:1 Feb 2024, 06:57 AM IST
HomeEconomy’Don’t think it’s likely…’ US Fed Chair Jerome Powell on March rate cut: 10 key highlights from FOMC meeting outcome

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