Fed’s Benchmark Interest Rate Holds Steady Sparking Rejoice as 2023 Nears its Closure

March 16, 2022 marked what would be the first of eight enacted hikes by the Federal Open Market Committee (FOMC) of the Federal Reserve’s benchmark interest rate in order to tame inflation which had reached an annual rate of 8.5%. Although remaining above the Fed’s target rate of 2%, the actions by the Fed, at least for now, have successfully lowered inflation to 3.2% as measured by Fed officials’ “preferred gauge, [which is] the index of personal consumption expenditure, excluding foot and energy,” representing a lower rate than the 3.9% figure projected in June 2023. The better than anticipated progress has enabled the Fed to ease its focus solely on inflation and return attention to both of its mandates — inflation and unemployment, meaning that as the Fed readies to backstop the economic recovery, although it doesn’t rule out a recession, it makes one less likely. The FOMC’s press release on Wednesday, December 14, 2023 announcing decisions to leave the target rate range of 5-1/4 to 5-1/2 unchanged for the third consecutive time sparked a rally in the market with the S&P 500 rising 12% since October 25th, while the Treasury 10-year yield lowered “back below 4% after touching 5% just two months ago.” However, Fed Chair Jerome Powell “cautioned that the economy may have more surprises ahead” and remains unsatisfied with inflation, so officially the Fed is “more likely to raise rates than cut them at their next few meetings.”

Source:    https://www.wsj.com/economy/central-banking/the-fed-underwrites-the-recovery-0573826c