The Federal Reserve has indicated a halt in its aggressive monetary tightening, suggesting that interest rates might decrease in 2024. This shift in policy, acknowledging easing inflation, implies potential stability in borrowing costs. The majority of Fed officials expect the policy rate, currently at 5.25%-5.50%, to drop by the end of 2024, with no projections for a rate increase next year.
Fed Chair Jerome Powell highlighted the uncertain economic outlook, maintaining the possibility of further rate hikes if needed, but deemed them unlikely. This stance led to a rise in U.S. stocks and a decline in the U.S. dollar and Treasury yields.
The Fed’s projections show inflation decreasing to near the 2% target by 2024, with unemployment slightly rising. This balanced approach aims for a “soft landing” of the economy, avoiding recession while controlling inflation. The Fed has paused rate increases since July, following a significant hike since March 2022. These developments reflect cautious optimism about the economic trajectory amidst global challenges.
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