{"id":42458,"date":"2023-12-19T14:57:57","date_gmt":"2023-12-19T22:57:57","guid":{"rendered":"https:\/\/goldco.com\/?p=42458"},"modified":"2024-09-04T12:22:14","modified_gmt":"2024-09-04T19:22:14","slug":"fed-holds-rates-steady-as-2023-draws-to-a-close","status":"publish","type":"post","link":"https:\/\/goldco.com\/fed-holds-rates-steady-as-2023-draws-to-a-close\/","title":{"rendered":"Fed Holds Rates Steady as 2023 Draws to a Close"},"content":{"rendered":"

In a move that wasn\u2019t at all surprising, the Federal Open Market Committee (FOMC) decided to hold its target interest rate steady at its final policy meeting of 2023. With that question settled for the year, the question now becomes what the Fed will do in 2024.<\/p>\n

While markets are largely expecting four rate cuts next year, there\u2019s no telling what will actually happen. But whatever the Fed ends up doing next year will undoubtedly have a major impact on markets.<\/p>\n

Are Rate Hikes Done?<\/h2>\n

From all appearances it seems that the Fed\u2019s rate hikes are over now. Having not raised its target interest rate in months, there doesn\u2019t seem to be any pressing need for continued interest rate hikes.<\/p>\n

Inflation, while still not under control, is at least not as high as it was last year, even if core inflation is still at 4%. And even though the unemployment rate is dropping, the overall employment situation isn\u2019t indicative of an overly hot labor market.<\/p>\n

Perhaps most importantly, Fed policymakers themselves seem to think that rate hikes are over. Of the 19 FOMC members who submitted their long-term projections<\/a> as the last meeting, only 2 thought that interest rates should remain at their current level at the end of next year.<\/p>\n

Most policymakers thought that the federal funds rate should be between 4.75-5% or 4.50-4.75% by the end of next year. Given 25 basis point cuts, that would indicate three to four rate cuts next year.<\/p>\n

Of course, Fed policymakers are known for their lack of foresight. At the end of 2022<\/a>, they had projected the federal funds rate to be 5.0-5.25% by the end of this year, a slight miss.<\/p>\n

And at the end of 2021<\/a>, they had projected the federal funds rate to be 0.75-1.00% by the end of 2023. Whoops!<\/p>\n

That goes to show that Fed policymakers themselves don\u2019t really know what\u2019s going to happen to the economy, nor how they\u2019re going to react to what\u2019s happening.<\/p>\n

What Might Be in Store for 2024<\/h2>\n

With fears of recession growing all the time, everyone wants to know what the Fed will do in 2024. If the economy starts to slow down, as many expect it to, it seems likely that the Fed will start to cut rates at some point. But when will it start?<\/p>\n

If the Fed starts to cut rates, it most likely would first occur after the March FOMC meeting, which is the first 2024 meeting featuring a press conference afterwards. It would be hard to imagine the Fed making a big about face without taking the time to express itself in a press conference.<\/p>\n

But regardless of what the Fed ends up doing, there are a few potential wild cards that could throw a wrench in the works. Among them are:<\/p>\n