Even though the process of increasing interest rates in America has stopped, now all eyes are on when the rate cuts will start.
At the last meeting, Fed policymakers had agreed to maintain a restrictive stance on policy for some time, knowing that rates are at an all-time high, with rate cuts starting in 2024.
The minutes of the Federal Open Market Committee Meeting held on 12 and 13 December have been released on Wednesday. In which policymakers are assuming that interest rates are either at their peak or have reached close to it.
Officials said, ‘It would be better for the policy to keep a restrictive stance for some time, this can be done until inflation is seen clearly going down on a large scale.’
Futures traders’ guess is correct, cut may happen from March
The minutes show that the projections made by policymakers indicate improvement in the inflation outlook. According to these baseline estimates, interest rates will fall to their lowest level by the end of 2024. This is what futures traders had predicted.
In the meeting, central bankers had unanimously agreed to keep the benchmark lending rate between 5.25% and 5.5% for the third consecutive time. Whereas the FOMC statement left the door open for another increase. Overall, officials have signaled the end of the most aggressive interest rate cycle.
There may be cuts 3 times this year: Estimates
According to quarterly estimates, there will be three cuts in interest rates in the year 2024 which will be equal to 75 basis points. Which will start with a quarter point cut in March. However, some Fed officials have resisted expectations of an immediate policy change in recent weeks. The next meeting of FOMC will be held on January 30-31.
Let us tell you that Powell had clearly said in the press conference that it would be too early to accept this as a victory, but he had admitted that there was discussion on the policy of reducing interest rates.
