Federal Reserve Expects Rate Cuts in 2024 But Path Remains Foggy, Minutes Reveal
The U.S. Federal Reserve expects to begin cutting interest rates in 2024, according to the minutes from the Federal Open Market Committee’s (FOMC) pivotal December meeting released today.
However, the path to eventual rate cuts remains highly uncertain, with various factors potentially altering the course along the way.
We have posted the minutes from the #FOMC meeting held December 12-13, 2023: https://t.co/kf68fZ2ESr
— Federal Reserve (@federalreserve) January 3, 2024
The FOMC minutes indicate participants foresee the federal funds rate, which currently sits between 5.25 to 5.5%, falling to around 2% by the end of 2024.
This outlook reflects notable improvements in inflation outlooks among policymakers in recent months.
After peaking at 9.1% in June 2022, inflation has steadily declined, reaching 6.5% in December.
Yet despite the predicted rate cuts, the minutes emphasize an “unusually elevated degree of uncertainty” surrounding the future policy path.
Several contingencies could throw things off track, including high inflation proving difficult to rein in or geopolitical events causing new disruptions. The post-pandemic economy remains in uncharted territory, in other words.
FOMC members reiterated the need to take a data-dependent approach going forward.
They stressed the importance of keeping policy restrictive until inflation is declining toward the Fed’s 2% target on a sustainable basis.
The minutes state: “Participants generally stressed the importance of maintaining a careful and data-dependent approach to making monetary policy decisions and reaffirmed that it would be appropriate for policy to remain at a restrictive stance for some time until inflation was clearly moving down sustainably toward the Committee’s
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