US Federal Reserve signals end of interest rate hikes, sees cuts in 2024
- Noting that inflation has eased, 17 of 19 US central bank officials projected that borrowing costs would be lower in the coming year
- Fed Chair Jerome Powell flagged the uncertainty of the outlook, however, and said he could not definitively rule out higher rates at this point
The US Federal Reserve held interest rates steady on Wednesday and signalled in new economic projections that the historic tightening of US monetary policy engineered over the last two years is at an end and lower borrowing costs are coming in 2024.
In a new policy statement, US central bank officials took explicit account of the fact that inflation “has eased over the past year”, and said they would watch the economy to see if “any” additional rate hikes are needed – implying directly that, after months of aggressive tightening and a bias towards moving rates higher, they may not need to raise them again.
Indeed, a near unanimous 17 of 19 Fed officials project that the policy rate will be lower by the end of 2024 than it is now – with the median projection showing it falling three-quarters of a percentage point from the current 5.25 to 5.50 per cent range. No officials see rates higher by the end of next year.
Speaking in a press conference following the end of a two-day policy meeting, Fed Chair Jerome Powell flagged the uncertainty of the outlook and said he could not definitively rule out higher rates at this point, even as officials looked toward a lower policy rate.
“While we believe our policy rate is at or near its peak for the tightening cycle, the economy has surprised forecasters,” Powell said. Because of the unpredictable nature of the economy, he said that while Fed officials “do not view it as likely to be appropriate to raise interest rates further, neither do they want to take the possibility off the table” if it’s needed.