The Federal Reserve Board has decided to maintain a steady interest rate policy for the third consecutive time. Although the Fed has not yet accomplished its inflation target rate of 2 percent, projections from Treasury Secretary Yellen suggest this might happen by the end of next year.
This decision to hold steady comes despite the Fed having raised interest rates 11 times since March of 2022. The Federal Reserve is carefully observing the impact these rate hikes have on the real economy - from employment rates to consumer spending, as their decisions directly affect borrowing costs and thus the public's ability to spend.
Indicators from the Fed suggest that 2024 will be the year for rate cuts, with traders pricing in approximately a 40 percent chance of the first rate cut occurring at the March meeting.
The recently released summary of economic projections provides insight into the Federal Reserve's outlook for unemployment, GDP, inflation, and interest rates in the following years. According to the latest data, it is expected that inflation will cool more rapidly than previously anticipated, although the 2% target is not predicted to be reached until 2026.
Twitter Post On Fed Keeps Rates Steady, Predicts Faster Inflation Cooling by 2024
Despite the prediction of cooling inflation, many Americans are still feeling the squeeze. The cost of living remains high, with households spending on average $1,000 more per month than a few years ago for the same basket of goods and services. Key essentials like housing, credit card debt, and student loans remain costly, even as food prices begin to stabilize.
However, there is hope that life may become more affordable for Americans in time. Increased wage growth across all income sectors could counterbalance inflation, improving affordability over the long term. Although lower-income households are still struggling with inflation and have turned to credit cards and consumer finance loans, their wages too have been gradually increasing.
Nevertheless, the decision to cut rates and when will have a significant effect on the public's financial well-being. Fed Chairman Jay Powell will likely field a lot of questions about this in his impending press conference.
