Fed leaves rate unchanged as recession predictions cloud future

The Federal Reserve announced it would not change its benchmark federal funds rate on Wednesday, keeping the rate at its highest level since 2001 as analysts’ predictions remain mixed about a possible 2024 recession.

The Fed’s decision not to raise rates keeps the target range between 5.25% and 5.50%, marking the third meeting in a row where the Fed chose to not adjust the rate, according to an announcement from the Federal Reserve following a meeting by the Federal Open Market Committee (FOMC). Top investment banks and asset managers are mixed in their forecasts for the U.S. economy in 2024, with strong growth but high inflation and slowing job numbers clouding recession predictions and complicating the Fed’s long-term goal to reduce inflation without triggering a recession.

“The Fed is unlikely to raise their interest rate targets any further in 2024,” Dr. Thomas Hogan, senior fellow at the American Institute for Economic Research, told the Daily Caller New Foundation. “The question is when they will start cutting rates. The median FOMC projection is that inflation (PCE inflation, not CPI) will fall to 2.5% in 2024 and that the fed funds rate will be cut to 5.1% by the end of 2024. If inflation appears to be coming down, then we should expect their economic projections to show lower projections for inflation and the fed funds rate, indicating they will begin cutting rates sooner than previously expected.”

The last rate hike was at the committee’s meeting in July and was the 11th in a series of hikes starting in March 2022 in an effort to combat inflation, which peaked at 9.1% in June 2022.

Inflation decelerated slightly in November, with the consumer price index (CPI) rising 3.1% year-over-year compared to 3.2% in October, far above the Fed’s 2% target. Core CPI, which excludes energy and food, remained even more elevated at 4.0%, following significant recent deflation in the price of gasoline.

The economy showed strong growth in the third quarter of 2023, with gross domestic product rising 5.2% compared to just 2.1% in the second quarter. The U.S. job market continues to slow, with the economy adding 199,000 jobs in November, with around 47,000 of those jobs coming from the return of striking workers in the auto and motion picture and sound industries.

“But even if the Fed does start cutting rates in 2024, it is unlikely to lower them by much,” Hogan told the DCNF. “The FOMC’s most recent projections show the FOMC keeping interest rates above 5% in 2024 and not getting below 4% until 2026.”

All republished articles must include our logo, our reporter’s byline, and their DCNF affiliation. For any questions about our guidelines or partnering with us, please contact licensing@dailycallernewsfoundation.org.

DONATE TO BIZPAC REVIEW

Please help us! If you are fed up with letting radical big tech execs, phony fact-checkers, tyrannical liberals and a lying mainstream media have unprecedented power over your news please consider making a donation to BPR to help us fight them. Now is the time. Truth has never been more critical!