Washington DC [US], December 14 (ANI): The Federal Reserve on Wednesday held interest rates steady at a 22-year high for the third straight meeting, while the central bankers have predicted three possible rate cuts next year, The Hill reported on Wednesday.
The Fed–the central bank of the United States–has raised rates 11 times since March 2022 to combat high inflation, which has slowed markedly after hitting a four-decade high last summer.
The Fed’s latest estimates also showed that officials now expect more rate cuts next year than previously estimated — three quarter-point cuts in 2024. That bodes well for America’s frozen housing market hamstrung by high mortgage rates and weak demand, according to CNN.
“We are likely at or near the peak rate for this cycle,” Fed Chair Jerome Powell said at a press conference following the announcement.
However, the central bank still hasn’t crossed the finish line yet. Fed officials are expecting inflation to cool next year at a slightly faster pace than previously estimated, CNN reported citing the latest set of economic projections, released Wednesday.
The central bank’s post-meeting statement noted that “inflation has eased over the past year but remains elevated,” which is a change from the usual sentence simply stating that “inflation remains elevated.”
Powell said “no one is declaring victory” just yet, and that doing so would be “premature,” but he admitted that officials are, at the very least, already discussing rate cuts.
The Federal Open Market Committee (FOMC) — the panel of Fed officials responsible for monetary policy — kept its baseline interest rate at a range of 5.25 to 5.5 per cent following its final meeting of the year, The Hill reported.
The central bank raised rates to that level in July and has now kept them there after three consecutive meetings.
Notably, several financial and economic experts were expecting the Fed to maintain its baseline interest rate range as inflation continues to fall but still remains above the bank’s target of 2 per cent annual price growth.
“Inflation has eased from its highs and this has come without a significant increase in unemployment. That’s very good news. But inflation is still too high,” Powell said, adding “the path forward is uncertain.”
Consumer prices were up 3.1 per cent annually as of November, according to Labor Department data, well below the 9.1 per cent annual inflation rate clocked in June of last year.
The economy has also fared far better than many forecasters expected and avoided a recession seen by many experts as inevitable. Just 3.7 per cent of American workers were unemployed in November, The Hill reported citing Labor Department data.
When asked if the Fed would front load rate cuts during an election year, Powell said, “We don’t think about political events, we don’t think about politics, we think about what’s the right thing to do for the economy.”
The committee’s outlook on gross domestic product came in at 2.6 per cent, up significantly from its September projection of 2.1 per cent following surprisingly hot economic growth. But the members expect that growth to slow to 1.4 per cent in 2024, in line with their earlier projections.
Economic growth and unemployment are two key metrics the Fed will be watching as they walk the line between cooling the economy without triggering a recession. While employment has been below 4 per cent for the longest stretch in decades, the committee expects that to change in 2024, ticking up to 4.1 per cent, The Hill reported. (ANI)
