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The significance lies in Powell's words
Fed officials are set to leave rates unchanged, shifting attention to what clues are offered about potential cuts.
Fed will likely stop short of signaling near-term cut
Officials may tweak statement to recognize inflation progress
As the Federal Reserve gears up for its inaugural 2024 meeting, the culmination of nearly two years of aggressive interest rate hikes aimed at curbing inflation comes into focus. The fruits of this labor are evident in the steadily diminishing pace of price increases. However, with the Fed convening today, a crucial question looms: when will the central bank pivot towards rate cuts?
Already signaling its intent, the Federal Reserve anticipates three rate cuts in 2024, spurred by a deceleration in inflation. Wall Street, not to be outdone, speculates the possibility of up to five cuts throughout the year. The prospect of rate reductions offers a potential respite for consumers and businesses grappling with elevated costs for mortgages, auto loans, and credit card debt, consequences of the Fed's preceding series of hikes.
Despite hopes for immediate relief, Wall Street forecasts a continuation of the status quo during this week's meeting, anticipating the first cut in March, not January, according to financial data provider FactSet. The Federal Reserve, exercising caution, treads carefully, cognizant of the delicate balance between avoiding prolonged high rates and premature cuts that could reignite inflationary pressures.
The path forward suggests a measured approach, with the Fed likely to maintain current rates for several more months. The central bank aims to glean a clearer understanding of the economic landscape, ensuring a prudent assessment of its trajectory.
Inflation unveiling: What Awaits in 2024?
February 13 heralds the release of the initial inflation report for 2024, revealing data on January prices courtesy of the Bureau of Labor Statistics. Recent indicators already provide a glimpse of inflation's retreat, with December's personal consumption expenditures, the Fed's preferred metric, rising 2.9% annually, excluding food and energy. This closely aligns with the Fed's target of an annual inflation rate of around 2%.
As economists anticipate a continued cooling trend in 2024, Oxford Economics forecasts a 2.4% annual increase in prices this year, with a further dip to 2.2% in 2025.
