Dec 2023 FOMC Outcome

Is it too early to celebrate ?

Interest rates remain unchanged at 5.25-5.5%, in line with expectations.

Fed believes they are  at the peak of interest rate hike cycle and has indicated 3 rate cuts in 2024 and 2 rate cuts in 2025. At the same time, in his speech, Powell also mentioned that they are prepared to tighten further, if appropriate.

While inflation (3.1%) still remains higher than the long term target of 2% and there is a downward pressure on inflation and economic activity, with labour markets showing signs of gradual easing.

December 2023 FOMC projects more accelerated rate cuts in 2024, to 4.6% in 2024 and 3.6% in 2025 as compared to September projections of 5.1% in 2024 and 3.9% in 2025, precisely what has rejoiced the markets.  Dow Jones crossed all time high of 37000 further taking the (short run) momentum ahead.