US Fed Meeting Live Highlights: Powell-led FOMC keeps key rates unchanged at 5.25-5.50%, signals 3 rate cuts in 2024

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The dollar sank more than 1 per cent against half of its Group-of-10 peers after the Federal Reserve left its benchmark interest rate unchanged. The yen strengthened as much as 142.88 per dollar, on track for its strongest close since early August.

The Treasury market rallied and swaps traders dialed up bets on interest-rate cuts after the Federal Reserve surprised investors with a more aggressive forecast for monetary easing next year.

Yields tumbled, with the policy-sensitive two-year note’s plunging more than 30 basis points to 4.43 per cent. The yield on the 10-year note fell more than 19 basis points to 4.01 per cent, and the five-year note’s yield fell below 4 per cent, becoming the first Treasury security to pay a rate that low since August.

Fed Chair Jerome Powell warned that the US economy could still make an unexpected return into recession despite its resilience in 2023, reported CNBC.

“There’s little basis for thinking that the economy is in a recession now. I think there’s always a probability that there will be a recession in the next year. It’s a meaningful probability no matter what the economy is doing. So it’s always a real possibility,\” Powell said. Powell came close to declaring rate hikes over, although he refused to completely shut the door on more increases.

The Dow Jones Industrial Average hit its first record high since January 2022 on Wednesday after the Federal Reserve signaled lower borrowing costs are coming in 2024. The Dow was up 1.12 per cent at 36,986.89 points.

Ending Wednesday\’s session at its current level would also mark the Dow\’s first-record high close since January 2022, and would confirm that it has been in a bull market since tumbling more than 20 per cent through its closing low in September 2022, according to a common definition.

The FOMC now expects the economy to grow by 2.6 per cent this year, up from 2.1 per cent in September, before slowing down to 1.4 per cent in 2024. Despite the Fed\’s aggressive policy of monetary tightening, the world\’s biggest economy grew at an annualized rate of 5.2 per cent in the third quarter of this year.

Policymakers lowered their forecast for economic growth slightly for next year while keeping unemployment projections unchanged. The unemployment rate seen rising from the current 3.7 per cent to 4.1 per cent, the same rate projected in September

In its quarterly projections, the Fed\’s policymakers now expect “core\” inflation, according to its preferred measure, to fall to just 2.4 per cent by the end of 2024, down from a 2.6 per cent forecast in September. Core inflation, which excludes volatile food and energy costs, is considered a better gauge to inflation’s future path.

Federal Reserve Chair Jerome Powell said he does not expect further tightening will be necessary, according to CNBC. “We are very focused on (how high to raise the policy rate),\” Powell said. “People generally think that we’re at or near that. And I think it’s not likely that we will, we’ll hike, although we don’t take that possibility off the table.\”

US stocks surged on Wednesday and benchmark Treasury yields slipped to their lowest level since August after the Federal Reserve flagged the end of its tightening cycle and struck a dovish tone for the year ahead.

All three major US stock indexes jumped sharply, on track to reach fresh closing highs for the year. The Dow Jones Industrial Average rose 372.14 points, or 1.02 per cent, to 36,950.08, the S&P 500 gained 51.59 points, or 1.11 per cent, at 4,695.29 and the Nasdaq Composite added 167.40 points, or 1.15 per cent, at 14,700.80.

Policymakers at the US Federal Reserve are considering when it will be \”appropriate\” to begin cutting interest rates, Fed Chair Jerome Powell said on Wednesday. \”The question of when will it become appropriate to begin dialing back the amount of policy restraint in place, that begins to come into view and is clearly a topic of discussion now in the world and also a discussion for us at our meeting today,\” Powell told a press conference.

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. For an institution that has been reluctant to declare victory over inflation that spiked last year to a 40-year high, the updated projections and new statement mark a notable shift in tone and outlook.

Fed Chair Jerome Powell said that the central bank sees the US economy losing steam in the final months of the year. “Recent indicators suggest that growth in economic activity has slowed substantially from the outsized pace seen in the third quarter. Even so, GDP is on track to expand around 2.5 per cent for the year as a whole,\” said Powell in the press conference.

The US Federal Reserve does not want to take the possibility of a further interest rate hike \”off the table,\” said the central bank\’s chair Jerome Powell on Wednesday. \”We are prepared to tighten policy further if appropriate,\” he told a press conference after the Fed announced it would hold rates steady to fight inflation.

Gold prices rose more than 1 per cent on Wednesday after the US Federal Reserve flagged an end to its interest rate hike cycle and indicated possible rate cuts next year. Spot gold gained 1.3 per cent to $2,004.79 per ounce as of 2:34 p.m. ET (1934 GMT). US gold futures settled 0.2 per cent higher at $1,997.30, according to news agency Reuters.

“Inflation has eased over the past year but remains over our longer run goal of 2 per cent,\” Chair Jerome Powell said at a news conference after the Fed\’s 19-member policy committee ended its latest meeting. In a statement issued, the Fed hinted that its rate-cut efforts may be over, saying it is considering whether “any additional\” hikes are needed.

The US dollar dropped against the euro and yen on Wednesday after the Federal Reserve signaled 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. 

A near 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 the rate falling three-quarters of a percentage point from the current 5.25 per cent-5.50 per cent range. No officials see rates higher by the end of next year.

In a new policy statement, the 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.

US Treasury yields dropped on Wednesday after the Federal Reserve held interest rates steady, as expected, but flagged in its new economic projections that its tightening policy is ending and rate cuts are on the horizon next year.

US benchmark 10-year yields fell to their lowest since August, and were last down 12.7 basis points (bps) at 4.08 per cent. US two-year yields, which reflect rate expectations, slid to their weakest level since mid-June, last down 18.9 bps at 4.54 per cent.

US central bank officials decided unanimously to leave the target range for the benchmark federal funds rate at 5.25 per cent to 5.5 per cent, the highest since 2001. Policymakers penciled in no further interest-rate hikes in their projections for the first time since March 2021, based on the median estimate.

Fed officials expect to lower rates by 75 basis points next year, a sharper pace of cuts than indicated in September’s projections. While the median forecast for the federal funds rate at the end of 2024 was 4.6 per cent, individuals’ expectations varied widely.

US stock are rising, and bond yields are sinking Wednesday after the Federal Reserve indicated cuts to interest rates may be coming next year. Wall Street has been craving such cuts, which can relax pressure on the economy and goose prices for investments.

The S&P 500 was 0.6 per cent higher, up from virtually flat just before the Fed\’s announcement. It\’s within 3 per cent of its record high, set early last year, after charging higher since October on expectations that cuts to rates are coming.

The Dow Jones Industrial Average was up 226 points, or 0.6 per cent, as of 2:13 p.m. Eastern time, and the Nasdaq composite was 0.6 per cent higher.

The Fed kept its benchmark rate at about 5.4 per cent, 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. Higher mortgage rates have sharply reduced home sales. Spending on appliances and other expensive goods that people often buy on credit has also declined.

The Federal Reserve kept its key interest rate unchanged Wednesday for a third straight time, a sign that it is likely done raising rates after having imposed the fastest string of increases in four decades to fight painfully high inflation.

The Fed’s policymakers also signaled that they expect to make three quarter-point cuts to their benchmark interest rate next year. 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 Federal Reserve kept its key interest rate unchanged Wednesday for a third straight time, a sign that it is likely done raising rates after having imposed the fastest string of increases in four decades to fight painfully high inflation. Powell-led rate setting panel also projects 75 basis points (bps) of rate cuts from the current level in 2024.

Federal Reserve keeps key interest rate 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 percent and 5.50 percent gives policymakers time to determine the \”extent of any additional policy firming that may be appropriate,\” the US central bank said in a statement.

Fed Chair Jerome Powell will unveil the FOMC policy decision on interest rates shortly. Powell will also address a post-policy press conference after the statement.

The US Fed is expected to signal that a pivot to monetary policy easing will neither come soon nor be sharp, even as inflation heads toward the US central bank\’s 2 per cent goal.

US central bankers are still likely to pencil in at least a couple of rate cuts by the end of next year, as they seek to strike the right balance between policy that\’s restrictive enough to slow spending and hiring but not so tight that it sends them into a tailspin.

Fed Chair Jerome Powell, however, is expected in a press conference to emphasize that any cuts in borrowing costs are contingent on further improvement on inflation.

Wall Street is gearing up for what’s expected to be the most-important Federal Reserve decision of the year, with traders awaiting any signals on whether the market’s aggressive dovish bid is now overdone, according to news agency Bloomberg.

Stocks, bonds and the dollar saw mild moves amid bets the Fed will hold rates Wednesday and try to put a lid on expectations for rate cuts of over 100 basis points in the next 12 months. How the Fed frames its outlook for policy ending next year and 2025 via its ‘dot plot’ could inject some uncertainty into the market that has run well ahead of the central bank’s forecasts.

The UK\’s FTSE 100 closed slightly higher on Wednesday as the pound slid following data showing the UK economy contracted in October, while markets awaited the Federal Reserve\’s rate decision later in the day.

The blue-chip FTSE 100 index edged up 0.1 per cent, with major dollar earners like AstraZeneca up over 2 per cent. The more domestically-focussed FTSE 250 mid-cap index also rose 0.2 per cent. Bucking the trend, shares of automobiles and parts fell to a one-month low, dropping 3.7 per cent.

Global equities held steady ahead of this year\’s final monetary policy decision from the Federal Reserve, and one day after an unremarkable US inflation report tempered expectations for an interest-rate reduction early next year.

On Wall Street, the Dow slipped briefly before righting itself to stand all but flat two hours into the session as caution prevailed with the US central bank forecast to hold its key lending rate at a 22-year high.

Just ahead of the decision, US Treasury Secretary Janet Yellen said the United States is likely to see inflation return to the Fed\’s target range of two per cent by the end of next year.

Oil prices edged up about 1 per cent on Wednesday from a five-month low in the prior session on a much bigger-than-expected weekly withdrawal from US crude storage. The US Energy Information Administration (EIA) said energy firms pulled 4.3 million barrels of crude from stockpiles during the week ended December 8.

Brent futures rose 78 cents, or 1.1 per cent, to $74.02 a barrel by 10:43 a.m. EST (1543 GMT), while U.S. West Texas Intermediate (WTI) crude rose 75 cents, or 1.1 per cent, to $69.36. On Tuesday, both Brent and WTI closed at their lowest since June 27.

European shares were subdued on Wednesday as investors broadly stayed away from risky bets ahead of the Federal Reserve\’s much-anticipated interest rate decision and policy outlook. The pan-European STOXX 600 inched 0.1 per cent lower. Germany\’ benchmark DAX and France\’s CAC-40 slipped 0.2 per cent each after scaling intraday record highs on Tuesday. Investors have fully priced in a pause from the Fed decision later in the day, with US inflation data doing little to alter rate cut bets for next year.

US Treasury Secretary Janet Yellen on Wednesday said she saw a consistent pattern of inflation falling over time and noted turbulence in the job market had really settled down.

\”Inflation has come down meaningfully. We\’re not all the way there. There\’s further to go for the Fed to reach its 2 per cent objective,\” Yellen told CNBC in an interview, expressing confidence that inflation would be in the 2 per cent range by the end of 2024. \”We\’re getting a lot closer.\”

The US is likely to see inflation return to the range of the Federal Reserve\’s two percent target by the end of next year, US Treasury Secretary Janet Yellen said Wednesday. \”I think when we come to the end of 2024, two is certainly likely to be the first numeral\” in the inflation figure, she told CNBC in an interview.

The Fed aims to bring inflation down to its longer run target of two per cent as it hikes interest rates, and Yellen\’s comments came hours before the central bank was to announce its next rate decision. For now, the world\’s biggest economy is on track to achieve a \”soft landing,\” Yellen said, referring to a scenario in which inflation cools without a major recession.

While she acknowledged that \”there is always some recession risk,\” she does not think it is especially high, noting resilience in consumer spending and in the labor market. She added that while inflation has \”come down meaningfully,\” there is some way to go for the Fed to reach its objective.

The US dollar edged up against the euro on Wednesday ahead of the conclusion of a Federal Reserve policy meeting that could offer some insight into when the US central bank will begin lowering interest rates. The main market focus will be on Fed officials’ updated economic and interest rate projections, with the US central bank expected to leave rates unchanged for the third consecutive meeting, according to Reuters.

Gold extended gains on Wednesday, as subdued Treasury yields boosted the bullion\’s appeal, while investors awaited the outcome of US Federal Reserve\’s meeting for cues to its monetary policy outlook. Spot gold gained 0.2 per cent at $1,982.49 per ounce as of 9:50 a.m. ET (1450 GMT). US gold futures rose 0.2 per cent to $1,997.70. The US 10-year Treasury yields retreated further after inflation data. In the 12 months through November, the US producer prices rose 0.9 per cent after advancing 1.2 per cent in October, according to news agency Reuters.

Wall Street is drifting near its all-time high Wednesday, ahead of an afternoon announcement from the Federal Reserve that could show whether all the optimism is warranted.

The S&P 500 was 0.1 per cent higher in morning trading and just 3.1 per cent below its record set early last year. The Dow Jones Industrial Average was down 8 points, or less than 0.1 per cent, as of 10:20 a.m. Eastern time, and the Nasdaq composite was 0.3 per cent higher

Big Tech stocks were helping to lead the way after getting some relief from easing yields in the bond market. Treasury yields sank after a report showed inflation at the wholesale level was a touch cooler last month than economists expected, and Nvidia rose 1.7 per cent.

Trivesh D, COO, Tradejini underscored that the US Federal Reserve is poised to uphold its steadfast hawkish stance. \”The Fed\’s resolute commitment to maintaining record-high interest rates, a strategy to combat inflation, is expected to persist, with no imminent plans for a reduction. This decision, while unlikely to trigger significant repercussions in the Indian stock market, underscores the fact that market participants have already factored in the effects of these unprecedented interest rates and the recent election dynamics,\” said Trivesh.

Expectations have been growing that the US Fed is inching closer to rate cuts but this could be too early to expect as inflation is still above the Fed\’s 2 per cent target and the recent US jobs data showed job growth rose last month. \”The Fed has signalled the end of the rate hiking cycle and will pause in the coming policy meet. A rate cut by the Fed is likely by mid-2024 and that is when the MPC also can go for a cut, assuming no major changes in the macro scenario,\” said VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services.

The central bank is widely expected to hold, but the latest US inflation data raised doubts about the likelihood of an aggressive pivot toward policy easing. “The market doesn’t agree with the Fed about inflation, so I expect some push back from Powell, but no game changer really,\” said Francois Rimeu, a strategist at La Francaise Asset Management in Paris. “The train has been in motion for a month and a half and one better not stand in front of it,\” he said, referring to the rally in markets on hopes of easing.

Stocks posted small moves in cautious trading as investors looked ahead to the Federal Reserve’s interest-rate decision, bracing for any warnings from Chair Jerome Powell that market expectations of policy easing are overdone.

Contracts for the S&P 500 and the Nasdaq 100 pointed to modest gains on Wall Street. Tesla Inc. dropped 1.4 per cent in premarket after recalling more than 2 million vehicles to fix autopilot safety flaws. Europe’s Stoxx 600 index edged higher, with Inditex SA climbing after the Zara owner forecast a stronger gross margin.

FOMC Schedule: December 12 to December 13, 2023

Date & Timing: 2 pm on December 13 (12.30 am IST on December 14)

Where to watch: You can watch the announcement live on the Fed\’s website or YouTube channel

US stocks were poised for a higher open on Wednesday as fresh data signaled signs of cooling inflation ahead of the Federal Reserve\’s final policy decision of the year, where it is widely expected to leave interest rates unchanged.

The Labor Department\’s report showed the Producer Price Index (PPI) for final demand rose 0.9 per cent on an annual basis in November.  On a month-on-month basis, producer prices were unchanged, against estimates of a 0.1 per cent increase.

The recent slew of reports, including the consumer price index (CPI) data on Tuesday, have cemented expectations that interest rates have peaked, with traders also estimating potential rate cuts next year. The upbeat sentiment led Wall Street\’s main indexes to close at fresh 2023 highs on Tuesday.

The dollar edged up on Wednesday ahead of the conclusion of a Federal Reserve policy meeting that could offer some insight into when the US central bank will begin lowering interest rates.

Sterling was among the weakest performers on the day, after data showed the British economy contracted in October, raising the risk of a recession and potentially complicating the efforts of the Bank of England to stick to its stance against cutting rates when it meets on Thursday.

The US dollar index, which gauges the performance of the currency against six others, was up 0.2 per cent at 103.94, recouping most of the previous day\’s 0.31 per cent drop.

The US Federal Reserve will probably want to see inflation come down further before easing policy and any expectations of interest rate cuts by March are “overly optimistic,\” India’s former central bank Governor Raghuram Rajan said.

While inflation in the US is slowing, it’s not easing at a fast enough pace that would give the Fed comfort to shift policy, Rajan, who is now a professor of finance at the University of Chicago Booth School of Business, told Menaka Doshi at a Bloomberg India Edition newsletter event in Mumbai.

“The Fed would like to see either a substantial fall in inflation, but also, the problem is the labor market is hot,\” Rajan, who is a well known commentator on the global economy, said Wednesday. “The Fed may think if rates are not doing damage, why worry.\”

Markets appear to be overly confident of a policy pivot by the Federal Reserve, warns the CEO of one of the world’s largest independent financial advisory, asset management and fintech organizations. The warning from Nigel Green of deVere Group comes as the inflation in the US is published by the US Bureau of Labor Statistics.

He says: “Inflation remains sticky. The Fed will not want to take the risk of pivoting on policy too soon by cutting rates.

“We believe that the data is still not strong enough for the central bank of the world’s largest economy to commit to reversing its most aggressive tightening campaign in decades – yet the markets seem read to confidently and heavily price-in rate cuts.

He concludes: “Will the Fed really pivot with inflation stubborn? We think not. “Yet markets seem to be getting carried away that the Fed and its peers of major central banks are ready to pivot. “Significant opportunities remain, but investors should avoid complacency.\”

Gold prices edged up on Wednesday, buoyed by weaker Treasury yields, but bullion was still near its lowest in over three weeks as the dollar inched higher ahead of the U.S. Federal Reserve\’s interest rate decision and policy outlook.

Spot gold gained 0.1 per cent at $1,981.30 per ounce. US gold futures rose 0.2 per cent to $1,997.60. The dollar index rose 0.1 per cent, making gold more expensive for other currency holders, but falling US 10-year Treasury yields lent some support to prices.

Oil prices slid to six-month lows on Wednesday and world shares killed time ahead of the year\’s final Federal Reserve policy decision and clues about the timing of next year\’s rate cuts.

Traders also were digesting the impact of an agreement from the COP 28 climate summit to begin reducing global consumption of fossil fuels, as well as Argentina\’s plan to weaken its peso over 50 per cent, cut energy subsidies and cancel tenders of public works.

Brent bottomed at $72.51 a barrel, its lowest since late June. US crude slid to $68.71 a barrel on concerns of softening demand as global economic growth slows, and oversupply after the US Energy Information Administration raised its forecast for US supply in 2023 by 300,000 barrels per day, and a jump in shipments of Russian crude.

Dr. V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services said, \”The short-term undercurrent of the Indian market is bullish despite the high valuations. The growth momentum in the economy, the sustained buying by DIIs and retail investors, reversal of the FPI strategy from selling to buying and favourable global cues will keep the market resilient. From the global perspective, tonight’s Fed message is important in setting the global market trend. Markets will wait for the Fed chief’s message before taking a decisive turn.\’\’

The US Federal Reserve began a two-day interest rate meeting Tuesday at which policymakers are widely expected to hold rates steady for a third straight meeting as they continue the fight against high inflation. The meeting began at 10:30 am (1530 GMT), the Fed announced in a statement.

With another pause almost certain, traders and analysts are keenly debating how soon the US central bank will start cutting interest rates, and how rapidly it will then do so. The Fed, which has a dual mandate to lower inflation to its long-term target of two percent while also tackling unemployment, has continued to keep the threat of another rate hike alive.

\”It would be premature to conclude with confidence that we have achieved a sufficiently restrictive stance, or to speculate on when policy might ease,\” Powell said recently. 

His comments appear to put the Fed at odds with other central banks such as the European Central Bank (ECB), where policymakers have indicated that they are likely done hiking interest rates.