January 31, 2024
The Federal Reserve, led by Chair Jerome Powell, signaled a halt to interest rate hikes, indicating that the current policy rate is likely at its peak for the tightening cycle. Powell mentioned a potential dialing back of policy restraint later in the year, emphasizing the readiness to maintain the current federal funds rate for a longer duration if deemed appropriate. While the Fed acknowledged a more balanced risk to achieving employment and inflation goals, they also conveyed a reluctance to reduce rates until there is greater confidence in inflation sustainably reaching the 2% target. The decision to keep the benchmark rate unchanged at 5.25% to 5.5% was unanimous. The Fed highlighted its commitment to balance sheet reduction and affirmed its long-term goals, acknowledging better-than-expected economic performance in 2023. The statement brought about changes in economic activity descriptions and omitted previous language about the soundness of the banking system. Policymakers hinted at contemplating rate cuts but dismissed hopes for immediate reductions. The Fed faces the challenge of managing inflation without causing a recession, with projections for potential rate cuts to be updated in March.
Federal Funds Target Rate
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