Following a two-day Federal Open Market Committee (FOMC) meeting, the US Federal Reserve announced its interest rate decision on Wednesday, leaving key interest rates unchanged for the third time in a row and forecasting three rate cuts next year.
The Fed’s decision to keep its benchmark lending rate between 5.25% and 5.50% gives policymakers time to assess the “extent of any additional policy firming that may be appropriate,” according to a statement issued by the US central bank.
The Federal Reserve stated in its FOMC statement that recent economic indicators indicate that economic activity has slowed from its strong pace in the third quarter. Job growth has slowed since earlier this year, but it remains strong, and the unemployment rate has remained low. Inflation has slowed in the last year but remains high.
The top five takeaways from FOMC meeting (US Fed meeting)
- The Fed’s policymakers indicated that they expect to cut their benchmark interest rate by three-quarter points in 2024. It was the first time the Fed had formally acknowledged progress in its fight against rising prices since inflation first spiked in 2021.
- The Fed kept its benchmark rate at around 5.4%, its highest level in 22 years, resulting in much higher mortgage, auto loan, business borrowing, and many other forms of credit costs.
- Policymakers at the Federal Reserve expect the US economy to grow by 2.6% this year, up from 2.1% in September, before slowing to 1.4% in 2024.
- Headline inflation is expected to slow to 2.8% in 2023, then to 2.4% in 2024, slower than previously anticipated. The Committee also stated its firm intention to return inflation to its 2% target.
- The FOMC members also reduced their median projection for interest rates at the end of next year to the midpoint between 4.50 and 4.75 percent, indicating that they now expect a 0.75% reduction.