Jan. 31 (UPI) — The Federal Reserve Board will deliver its first policy decision on interest rates in 2024 amid weakening inflation and a strengthening economy, while Wall Street expected the central bank to leave the current rate unchanged.
Fed Chairman Jerome Powell will make his customary announcement at 2:30 p.m. EST following a two-day meeting of monetary policymakers on whether interest will be raised, lowered or maintained in the near term.
The interest rate decision comes amid improving inflation in the United States, reflected in a 0.2% rise in the personal consumption expenditures price index since December, and a 2.9% increase over the past year — the Fed’s preferred gauge of inflation.
In remarks, Powell will provide details about the latest interest rate decision, as well as the central bank’s outlook for the coming months.
Wall Street analysts expect the Fed to hold rates steady, between 5.25% and 5.5%, as it did during the last policy meeting in December, and to delay the first interest cut of the year until at least March, according to CBS News, citing financial data provider FactSet.
Many economists expected the Fed to wait even longer to cut rates, possibly until May, as the central bank was wary about inflation regaining steam if it moved too hastily to lower interest.
As a result, the Fed was likely to avoid making any decisive move on interest during Wednesday’s announcement.
“The Fed is being very cautious as it navigates the potential for future rate cuts,” LendingTree economist Jacob Channel told CBS. “While it doesn’t want to leave rates high forever, it also doesn’t want to cut them prematurely and risk inflation spiking again.”
The Fed issued 11 consecutive benchmark rate increases with the goal of bringing inflation down to 2%.
But in the latter half of 2023, the nation’s central bank began keeping interest rates unchanged to sustain the economy’s upward trajectory.
At the last policy meeting, the Fed indicated that it might start slashing interest rates again after the new year as inflation had dipped to about 3.7% toward the end of 2023.
However, Powell said it was too soon to say when the reductions might occur, warning that any speculation about the timing of interest rate cuts was premature.
“It would be premature to conclude with confidence that we have achieved a sufficiently restrictive stance, or to speculate on when policy might ease,” Powell said on Dec. 1.
“We have made considerable progress in reducing high inflation while maintaining a strong labor market,” he continued. “The Federal Open Market Committee is strongly committed to bringing inflation down to 2% over time, and to keeping policy restrictive until we are confident that inflation is on a path to that objective.”
Economists are now hopeful for the first interest rate cut in more than two years, while some predict the Fed could potentially issue five reductions throughout 2024 — bringing relief to borrowers who have struggled to pay off high-interest mortgages, auto loans and credit cards.
Meanwhile, 10-year Treasury yields declined Wednesday to 4.0241%, while the 2-year Treasury yield was more than three points lower at 4.3221%, according to CNBC.
This follows a post-pandemic boom on the bond note that electrified Wall Street in 2023.
Previously, the bond market bottomed out at 0.5% in 2020 as investors fled to risk-free Treasuries during the global pandemic, but bounced back in 2023 as industry recovered following the official end of the national health emergency last May.
