The Federal Reserve said Wednesday that it plans to cut interest rates later this year, although the benchmark federal funds rate remains unchanged.
The Fed's decision to hold off on raising interest rates maintains its target range between 5.25% and 5.50%, the highest level since 2001, and marks the fourth consecutive time the Fed has chosen to hold off on raising rates, according to the report. Become. announcement The announcement was made by the Fed after the Federal Open Market Committee (FOMC) meeting. Investors are increasingly predicting a rate cut in anticipation of the upcoming FOMC meeting, and as of January 31, the market estimates that the probability of a rate cut in March is approximately 58%. according to To CME Group. (Related: Shipping giant to lay off thousands of workers as union agreement hurts profits)
“The committee determines that the risks to employment and achieving the inflation target are moving toward a better balance,” the Fed said in its announcement. “The economic outlook remains uncertain, and the Committee continues to pay close attention to inflation risks. In support of that goal, the Committee has increased its target range for the federal funds rate from 5-1/4 to 5-1. We decided to keep it at /2 percent.”
The interest rate was set at its current level after a series of 11 rate hikes starting in March 2022, with the last hike in July 2023. The federal funds rate has been raised in an effort to control inflation, peaking at 9.1% under President Joe Biden. In June 2022.
FOMC members for December projected The median interest rate by the end of the year will be 4.6%, likely the equivalent of three 0.25% cuts.
The 10-year Treasury yield is just one basis point away from a “death cross,” meaning the 50-day moving average is below the 200-day mark. This is a very bullish bond. Buy it, Mortimer!! pic.twitter.com/rqbvPHo5Ku
— David Rosenberg (@EconguyRosie) January 31, 2024
Despite the rate hikes, inflation has not returned to the Fed's annual target of 2%, most recently at 3.4% in December compared to the same month last year, after rising 0.3% in the same month. The core consumer price index, which measures inflation without the volatile categories of energy and food, has risen further, rising at an annual rate of 3.9% in December.
With interest rate cuts on the horizon, Americans may soon see some relief from the tight credit conditions that are driving up interest rates on things like credit cards and mortgages. The average 30-year mortgage rate reached a recent peak of 7.79% on October 26, 2023, after rising rapidly from 2.65% in early 2021.
The Fed is also responsible for ensuring maximum employment for Americans, and the U.S. added 216,000 nonfarm payrolls in December, consistent with previous years' increases. Despite this month's healthy growth, the bulk of the hiring was concentrated in a few sectors, including government.
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