As the world awaits the upcoming Federal Open Market Committee (FOMC) meeting scheduled for December 12-13, 2023, expectations are high that the Federal Reserve will opt to maintain interest rates at the current target of 5.25-5.50%. This decision, if confirmed, would mark the third consecutive meeting where policymakers have chosen to keep rates steady.
Since March 2022, the Federal Reserve, under the leadership of Jerome Powell and his colleagues, has implemented an aggressive strategy of raising interest rates. In total, rates have been raised 11 times in an effort to combat inflation. The most recent adjustment occurred in July, lifting the key benchmark rate to 5.25-5.50%, a level not observed since 2001.
The string of rate hikes has notably affected various sectors of the economy, making loans more expensive for mortgages, auto loans, credit cards, and business borrowing. This, in turn, has led to a decline in purchases of homes, cars, furniture, and appliances, contributing to a modest decrease in prices within these categories.
However, amidst these economic shifts, there are signs of recovery. US job growth in November accelerated, coupled with a drop in the unemployment rate to 3.7%, easing concerns of an imminent recession. The Labor Department's Bureau of Labor Statistics reported a gain of 199,000 jobs, following a previous month's rise of 150,000 jobs.
Meanwhile, US stock futures were little changed on Monday (December 11) as investors awaited this week’s final Federal Reserve meeting of 2023 for any signals on when central bankers will begin to cut interest rates. Futures tied to the Dow Jones Industrial Average hovered near the flatline. S&P 500 futures dipped 0.06%, and Nasdaq-100 futures dropped 0.1%, reported CNBC.
Despite these positive indicators, experts anticipate that the Federal Reserve will maintain a cautious stance and opt to keep interest rates unchanged in the upcoming meeting.
The Federal Open Market Committee consists of 12 members — the seven members of the Board of Governors of the Federal Reserve System; the president of the Federal Reserve Bank of New York; and four of the remaining 11 Reserve Bank presidents, who serve one-year terms on a rotating basis.
Also Read: US Fed's Jerome Powell notes inflation is easing but downplays discussion of interest rate cuts
The FOMC holds eight regularly scheduled meetings per year. At these meetings, the committee reviews economic and financial conditions, determines the appropriate stance of monetary policy, and assesses the risks to its long-run goals of price stability and sustainable economic growth.
During an interview with CNBC-TV18, Herald Van Der Linde, the Head of Asia Equity Strategy at HSBC, shared his insights regarding the US Federal Reserve. He said, “We think that the rate cuts will come a little bit later into 2024. And if there is a risk to markets, it's exactly this, the market is already anticipating quite substantial rate cuts coming through and we might get disappointed in that which means that we have to recalibrate, the bond yields go up a little bit, and the equity space comes down a little bit again, but I just see that as a recalibration. I don't think that is a structural shift.”
(Edited by : Shoma Bhattacharjee)
First Published: Dec 11, 2023 7:00 PM IST
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