- Federal Reserve signals intention to reduce interest rates three times in 2024.
- The move is in response to signs of waning US inflation, which reached its highest level in 22 years.
- Federal Reserve Chairman Jerome Powell emphasizes a careful approach due to “uncertainties and risks.”
The officials at the Federal Reserve have signaled their intention to reduce interest rates three times in 2024 during the recent two day Federal Open Market Committee (FOMC) meeting. This strategic move comes as US inflation, which reached its highest level in 22 years, shows signs of waning.
The Federal Reserve’s decision to maintain current rates was expected at the FOMC meeting on December 12-13. Federal Reserve Chairman Jerome Powell, while addressing reporters, emphasized that no premature victory declarations were being made.
Although rates were deemed “likely at or near” their peak, Powell highlighted lingering “uncertainties and risks” requiring a careful approach by the committee.
Powell’s comments were received with optimism, as they revealed that the majority of the rate-setting open market committee members foresaw three rate reductions in 2024.
The central focus of the Federal Reserve remains the strength of the US economy, which has displayed unexpected resilience despite experiencing the fastest succession of rate increases in four decades.
While inflation has shown signs of weakening, recent data indicates a consumer price index rise of 3.1% in November, a decline from 3.2% in October. However, this remains above the Fed’s targeted 2%, emphasizing the ongoing challenge of elevated living costs for many Americans.
Chairman Powell acknowledged the welcome reduction in inflation readings over recent months but stressed the need for sustained evidence to build confidence in inflation’s downward trajectory toward the 2% goal.
The Federal Reserve, after adopting an aggressive stance against inflation in March of the previous year, has raised its benchmark interest rate 11 times, leading to a cumulative increase of 5.25 points.
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