Most Federal Reserve officials wanted to keep borrowing costs high for ” some time”.
The officials seem cautious about committing to lowering borrowing rates in the near future, and they don’t want to commit to any immediate loosening of monetary policy.
Despite their caution, policymakers acknowledged the outlook for inflation was “moving toward greater balance”. Investors were not surprised by the account in the Federal Open Market Committee minutes. Forward markets continued to price in about six interest rate cuts for 2024. The Fed’s December projection showed most officials expected rates ending 2024 between 4.5 per cent and 4.75 per cent. The FOMC also expects rates to fall further in 2025, ending the year between 3.5 per cent and 3.75 per cent. The dot-plot projections show core Personal Consumption Expenditure index falling to 2.4 per cent this year and 2.2 per cent in 2025, before hitting the central bank’s 2 per cent goal in 2026. Bond yields have risen above 4 per cent for the first time since the December meeting. Data from November showed job openings had fallen to the lowest level in more than two years, suggesting a cooling labor market and bolstering expectations of rate cuts. Double-digit inflation has dented the Federal Reserve’s reputation, but it has not raised rates since July, and price pressures have declined sharply.

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