Today, in line with general market expectations, the US Fed’s monetary committee decided to keep key rates at current levels.
The monetary committee also indicated that there could be as many as 3 rate cuts in quarter-percentage-point increments next year, far outstripping Fed members’ comments so far. In this regard, the market has so far calculated up to four similar interventions.
The monetary committee also indicated a framework for further cuts in the coming years. In 2025, rates could fall in four more steps and in 2026 in another 3 steps towards the target area of 2-2.25%.
Along with the rate cuts, the Fed plans to reduce its total balance of government bond holdings by up to USD 95 billion per month. In this regard, the Central Bank plans not to renew maturing bonds.
According to the monetary committee, inflation weakened in the last year, however, it remains at elevated levels. For this year, the Fed sees average core inflation at 3.2%, falling to 2.4% next year. It should reach the target of 2% in 2026.
The committee also adjusted its estimates for the further development of GDP. This year, it should grow by 2.6% on an annual basis, compared to the 2.1% estimated in September. In 2024, GDP growth should slow to 1.4%, similar to earlier estimates.
Estimates for the development of unemployment have hardly changed and remained at 3.8% in 2023 and 4.1% in the following years.
Stock markets react significantly positively to the news, the dollar weakened sharply against the euro.
Vladimir Urbanek
In the “industry” for more than 20 years. After several years of experience directly in securities trading, Vladimír Urbanek has been devoting himself to reporting on domestic and foreign capital markets for more than 15 years.
He considers the experience, or rather the possibility of comparison with the time before the last big crisis in 2008-9, to be important.
2023-12-13 19:46:54
#Fed #surprised #change #rates #expects #decreases #year #stronger #GDP #growth #compared #previous #estimates
