The President of the Federal Reserve of the United States, Jerome Powell (Photo: Getty Images)
Washington – Status quo at the Fed, which as expected, left its rates unchanged, and plans to lower them several times in 2024, noting the slowdown in economic activity, and emphasizing that inflation remains “high”.
The US central bank kept its rates in a range of 5.25 to 5.50%, the highest in 22 years, a decision made unanimously, according to a statement released at the end of the meeting.
Its officials anticipate primarily three or four declines next year, to bring them to 4.6% by the end of 2024.
Read also: Les Affaires looks back on the rapid growth of the Fed’s key rate
“Recent indicators suggest that the growth of economic activity has slowed from its solid pace in the third quarter,” commented the Fed’s monetary policy committee, the FOMC, at the end of the meeting. begun Tuesday morning.
Federal Reserve officials also note that “inflation has slowed over the past year, but remains high.”
Inflation is expected to slow slightly faster than expected, to fall to 2.4% by the end of 2024, according to updated forecasts, compared to 2.5% anticipated in previous ones in September. But it will take until 2026 to see it return to the desired level of 2.0%.
As for growth, it will be stronger this year than initially expected, at 2.6% (compared to 2.1%), but should slow down more than expected next year, to 1.4% (versus 1.5%), and then accelerate again.
No change, however, for the unemployment rate, expected to be 3.8% this year, and 4.1% in 2024.
Caution
The President of the institution, Jerome Powell, however, should, during the press conference that he will hold at 2:30 pm, insist that it is too early to predict when it will be appropriate to start lowering the rates.
“It would be premature […] to speculate on when policy could be loosened,” he recently recalled, “these progress must continue if we want to achieve our 2% target”.
He should also maintain a cautious tone, not ruling out the possibility of raising rates further if necessary, and delaying any discussion on when it will be appropriate to start lowering the cost of credit again.
The Fed raised its rates 11 times since March 2022 to curb high inflation. However, it has not touched them since July, to observe the effects of these increases, and avoid plunging the US economy into recession.
After soaring to levels not seen since the early 1980s, inflation is now on the rise.
It slowed to 3.1% year-on-year in November, according to the CPI index, and to 3.0% in October according to the PCE index, the one the Fed wants to bring back to 2% – and for which the November data have not yet been published.
“By the end of 2024, the inflation index will surely start with the number 2,” that is, it will be between 2.00 and 2.9%, predicted on Wednesday the Secretary of the Treasury, Janet Yellen, on the CNBC channel.
And the world’s largest economy seems well on its way to a “soft landing”, a drop in inflation without a recession, she estimated.
“The employment situation still seems excellent and inflation is decreasing very quickly. And that’s exactly what we promised, ”also recently praised the President of the Federal Reserve of Chicago, Austan Goolsbee.
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