At the most recent meeting, the US Federal Reserve System (Fed) decided to keep interest rates at 525%-5.50% range, while adjusting for the future economy, inflation and interest rates**. Fed Chair Jerome Powell indicated at a press conference that interest rates are close to their peak and that discussions of monetary policy easing have begun.
The Fed's dot plot shows that it is expected to cut rates three times next year, which is one more than in September. In its quarterly economic outlook, the Fed lowered its outlook for economic growth, headline inflation and interest rates for next year**, but expects the job market to remain stable. The decision statement highlighted inflation risks and mentioned that the Fed will consider the cumulative effects of monetary policy and the lagged impact of economic activity with inflation when deciding on the extent of further policy tightening.
Powell mentioned that although inflation has come down from its highs, there is still a long way to go, and he also mentioned the possibility of a recession. According to the Federal Reserve's latest Summary of Economic Expectations (SEP), GDP growth is expected to be revised slightly in 2024, while growth is expected to remain unchanged or increase slightly in 2025 and 2026.
In terms of rate cut expectations, the median Federal** rate for 2023 is expected to be 54%, down 20 basis points from September**. The median interest rate is projected to be 4 in 2024 and 2025, respectively6% and 36%, all down from before. Long-term interest rates are expected to remain at 25%。
While the Fed's policy rate may be close to the peak of the current tightening cycle, Powell stressed that the Fed is prepared to tighten policy further if appropriate. At the same time, he mentioned that there are no plans to adjust the quantitative tightening program at this time.
In addition, Fed policymakers began to discuss policy easing, with Powell mentioning the point in time to reduce monetary policy restrictions. The downward revisions to the economy and inflation** mentioned in the SEP, as well as the expectation of a stable labor market, are important considerations in the current economic environment.
The Fed's decision and its discussion of the future direction of policy demonstrate a cautious approach to the current economic situation and a focus on a possible future recession. For the market and investors, the direction of the Fed's policy will be a key factor affecting the future trend of financial markets.