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The US Federal Reserve Wednesday announced its interest rate decision after a two-day Federal Open Market Committee (FOMC) meeting, leaving the key interest rates unchanged for the third time in a row and foresees 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 determine the “extent of any additional policy firming that may be appropriate,” the US central bank said in a statement.
Releasing the FOMC statement, the Federal Reserve said that the recent economic indicators suggest that growth of economic activity has slowed from its strong pace in the third quarter. Job gains have moderated since earlier in the year but remain strong, and the unemployment rate has remained low. Inflation has eased over the past year but remains elevated.
Here are key takeaways from the Federal Reserve's interest-rate decision and economic forecasts:
- The Fed’s policymakers signalled that they expect to make three quarter-point cuts to their benchmark interest rate in 2024. It was the first time since inflation first spiked in 2021 that the Fed has formally acknowledged progress in its fight against accelerating prices.
- The Fed kept its benchmark rate at about 5.4%, its highest level in 22 years, a rate that has led to much higher costs for mortgages, auto loans, business borrowing and many other forms of credit.
- The Fed policymakers expect the US economy to grow by 2.6% this year, up from 2.1% in September, before slowing down to 1.4% in 2024.
- Headline inflation is expected to slow more than previously expected to 2.8% in 2023, before easing to 2.4% in 2024. The Committee also signalled its strong commitment to returning inflation to its 2% objective.
- The FOMC members also cut the median projection for interest rates at the end of next year to the midpoint between 4.50 and 4.75, signalling they now expect 0.75% points of cuts.
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Published: 14 Dec 2023, 01:47 AM IST
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