In recent days, the major central banks in the West maintained their current interest rates, but their outlook on anticipated cuts in 2024 varied significantly.
The U.S. Federal Reserve surprised the market on Wednesday by keeping its benchmark rate within the range of 5.25% to 5.5%. However, the Federal Open Market Committee disclosed that policymakers were considering at least three cuts next year and an additional four cuts in 2025.
As a result, the markets have priced in a 25-basis-point cut expected to occur in March, and they anticipate a total reduction of 150 basis points by the end of next year based on CME Group’s FedWatch tool.
Although the Fed’s projected cuts fell short of market expectations, the announcement still had a dovish impact. This led to the Dow reaching a new record high and a decline in bond yields, including the 10-year U.S. Treasury yield, which fell below 4% for the first time since July.
While U.S. headline inflation stood at 3.1% annually in November, remaining above the Fed’s 2% target, it has significantly reduced from its peak of 9.1% during the pandemic in June 2022. However, the core figure, which excludes volatile food and energy prices, remained stable at 4%.
Additionally, the economy has shown remarkable resilience, with GDP experiencing annual growth of 5.2% in the third quarter.
During his press conference, Fed Chair Jerome Powell acknowledged that rate cuts were on the horizon. As a result, several economists and major lenders have adjusted their future rate predictions in response to Powell’s comments.
Source (CNBC)
