The US Federal Reserve left interest rates unchanged Wednesday for its third consecutive meeting and signaled that rate cuts are coming in 2024.
Federal Open Market Committee Members unanimously voted to hold the benchmark overnight borrowing rate at a target range of 5.25%-5.5%, a decision largely anticipated by analysts and investors.
However, markets rallied on the committee’s projection of at least three rate cuts in 2024, which would bring to an end a tightening cycle that has seen 11 hikes and the highest interest rates in more than two decades.
“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 discussion topic of discussion out in the world and also of discussion for us at our meeting reading today,” Fed Chair Jerome Powell said at a press conference following the meeting.
“I would say there’s a general expectation that this will be a topic for us looking ahead,” he added.
The FOMC’s dot plot, which tracks individual members’ expectations, shows an average of another four projected rate cuts in 2025 and three cuts in 2026. That would bring rates back down to a range of 2%-2.25%.
In a statement following its meeting, the FOMC noted that inflation has “eased over the past year” even as prices remain “elevated.”
Powell also noted that the economy could still fall into a recession, despite showing resilience in 2023.
“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.
—Story updated to include Powell's comments—