WASHINGTON–As expected, the Federal Reserve’s Open Market Committee has adjourned after two days of meetings and opted to leave rates untouched.
The meeting concluded just one day after new consumer price index data showed inflation continues to cool, as CUToday.info reported here.
As a result, after two years of steady increases, the Fed left the federal funds rate at 5.25% to 5.50%. Credit union economists have been forecasting the era of rate inreases is over, and that the Fed will actualy begin to reduce rates in the first half of 2024.
In its analysis, Yahoo Finance noted the Fed's forecasts had suggested the central bank would cut interest rates by 0.50%. "The Fed has moved in 25-basis-point increments over the last year, indicating the central bank now expects to cut interest rates three times in 2024," Yahoo Finance stated.
These projections come as the central bank now expects inflation to fall to 2.4% next year — down from 2.5% forecast in September — and drop further to 2.2% by 2025.
“Recent indicators suggest that growth of economic activity has slowed from its strong pace in the third quarter,” the Fed said in a statement. “Job gains have moderated since earlier in the year but remain strong, and the unemployment rate has remained low. Inflation has eased over the past year but remains elevated.
“The U.S. banking system is sound and resilient. Tighter financial and credit conditions for households and businesses are likely to weigh on economic activity, hiring, and inflation,” the statement continued. “The extent of these effects remains uncertain. The Committee remains highly attentive to inflation risks.”
The Fed added it will move to take “additional policy firming” should inflation not return to its 2% objective.
NAFCU: 'Significant Headway'
"In its December statement, the FOMC acknowledged that inflation has made significant headway back towards the committee’s target. Updated economic projections confirm what markets have come to believe: namely, that multiple rate cuts are in store for 2024. NAFCU expects the first cut will occur during the second quarter," said NAFCU Vice President of Research and Chief Economist Curt Long.
Voting for the monetary policy action were Jerome H. Powell, Chair; John C. Williams, Vice Chair; Michael S. Barr; Michelle W. Bowman; Lisa D. Cook; Austan D. Goolsbee; Patrick Harker; Philip N. Jefferson; Neel Kashkari; Adriana D. Kugler; Lorie K. Logan; and Christopher J. Waller.