The Federal Open Market Committee (FOMC) begins its 2-day policy meeting today, and the markets will be looking for signs of whether the Fed thinks it will be able to begin cutting interest rates next year. With inflation falling significantly from a 42-year high last year, rate reductions in 2024 look increasingly likely. The markets expect the FOMC on Wednesday to hold interest rates steady for the third consecutive meeting and will look to Fed projections on when they may begin cutting rates.
Recent U.S. economic news shows the economy is holding up. After last Friday’s monthly U.S. payroll report showed November payrolls rose more than expected and the unemployment rate unexpectedly declined to a 4-month low of 3.7%, the Fed may not signal an aggressive path of rate cuts. Also, today’s U.S. CPI report showed Nov CPI ex-food and energy was still up +4.0% y/y, double the Fed’s 2.0% inflation target.
