Dec. 13 (UPI) — The Federal Reserve board Wednesday decided to hold interest rates steady amid falling inflation. The board indicated at least three possible rate cuts in the coming year.
Wednesday’s decision left benchmark interest rates in a target range between 5.25% and 5.5%. It’s the third straight time the Fed left interest rates unchanged.
Markets reacted enthusiastically to the decision, with the Dow soaring to a record high, closing at 37,090.24 and far past its previous high of 36,799.65, which it reached almost two years ago.
Additionally, the S&P 500 was up, too, gaining 1.4%, which the Nasdaq also acquired Wednesday afternoon.
The Fed statement Wednesday indicated a strong economy that is not currently in recession, but it said there has been a slowing of growth.
“Recent indicators suggest that growth of economic activity has slowed from its strong pace in the third quarter,” the Fed statement said. “Job gains have moderated since earlier in the year but remain strong, and the unemployment rate has remained low. Inflation has eased over the past year but remains elevated.”
The Fed’s individual members’ expectations, known as the “dot plot,” indicated four possible interest rate cuts for 2024, amounting to a full interest point.
In addition to holding interest rates steady for now, the Fed said in its statement that it “will continue reducing its holdings of Treasury securities and agency debt and agency mortgage-backed securities, as described in its previously announced plans.”
That amounts to up to $95 billion a month in proceeds from maturing bonds.
The interest rate decision came as the U.S. inflation rate continues to gradually decline, with consumer inflation at 3.1% from year-ago levels.
That’s a big drop from the 8.3% inflation rate in August 2022.
The Fed’s assessment is that the U.S. banking system is sound and resilient, even as tight money policy for households and businesses “are likely to weigh on economic activity, hiring, and inflation.”
The central bank reiterated its desire and commitment to return inflation to 2% annually and said it would continue to to assess additional information and its implications for monetary policy.
