US Fed Holds Rates Steady, Projects Cuts in ‘24

Improve the News Foundation -
0:00
/1861

Facts

  • The US Federal Reserve (Fed) on Wednesday announced for the third straight time that it wouldn't be changing its key short-term interest rate from its 22-year high of 5.25% to 5.5%.1
  • In addition, the central bank suggested there could be three rate cuts next year, reducing the rate by three-quarters of a percent. Fed Chair Jerome Powell said in a press conference that “the appropriate level will be 4.6% at the end of 2024.”2
  • The announcements come as the Fed projects inflation to drop to 2.4% next year and possibly to 2.2% by 2025 — closer to the central bank’s goal of 2% inflation.3
  • Previously, the Fed attempted to reduce inflation by limiting the asset purchases it executed to keep the economy going during the height of the COVID pandemic and then quickly raising its benchmark policy interest rate starting in March 2022 from near zero to its current level.4
  • Powell, however, emphasized that “inflation is too high … and the path is uncertain.” He went on to say that although rate hikes slowed the housing market, employment is still high and consumer spending has remained strong, especially in the current holiday season.5
  • Powell also maintained that future rate hikes “remained on the table.”6

Sources: 1USA Today, 2CBS, 3Yahoo finance, 4Reuters, 5Abc news and 6CNN.

Narratives

  • Democratic narrative, as provided by Washington Post. The economic recovery from the COVID era is nearing the finish line and we can see the light at the end of the tunnel. Inflation, jobs, wages, and consumer spending data are all doing so well, even the deliberate Powell has been moved to hold rates steady and forecast potential decreases. The markets reacted well to the news and it looks like the US, under Pres. Joe Biden, is headed toward a great 2024.
  • Republican narrative, as provided by Townhall. The Biden administration and the Fed can spin these numbers in their favor, but they shouldn’t ignore that Americans have faced more than two years of negative real wages because inflation has outpaced wage growth. Americans’ spending power has been decimated and their debt has skyrocketed because of the inflation brought on by Democrats’ big spending. We can’t trust the current regime to truly get the economy rolling.

Predictions