Fed Flags End Of Rate Hikes, Sees Borrowing Costs Falling In 2024
The 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 it 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 nearly 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 5.25-5.5 per cent range. No officials see rates higher by the end of next year.
The newest projections also showed policymakers see the risks to inflation and employment - the two planks of the Fed's dual mandate - were coming into better balance.
US stocks rose following the release of the policy statement and projections while the US dollar dropped against a basket of currencies. US Treasury yields also fell further.
"A marginally more dovish-than-expected 'dot plot' doesn't exactly provide the pushback on market pricing and looser financial conditions that most had been expecting," said Michael Brown, a market analyst at TraderX, referring to the distribution of Fed officials' policy rate projections.
Traders of futures contracts that track expectations for the Fed's policy rate raised the probability that the central bank would cut rates in March of next year to more than 60 per cent following the policy decision and release of the projections.
(REUTERS)
