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Fed holds rates steady in November meeting

Fed holds rates steady, indicates three cuts coming in 2024

The Federal Reserve held interest rates steady in its November FOMC meeting, acknowledging the US economy's surprising strength but also nodding to the tighter financial conditions faced by businesses and households and leaving the door open to a further increase in borrowing costs. The Chair has hinted that the US central bank may be finished with the most aggressive tightening cycle in four decades after pausing for a second consecutive policy meeting. The Fed wants to keep the door open for additional hikes in December or next year.

The statement was largely a 'copy and paste' of the previous meeting and contained minor adjustments reflecting developments that had occurred since September's meeting, including an upgraded assessment of recent growth, a slight adjustment to the description of job growth, and a reference to recent tightening in financial conditions as likely weighing on economic activity. In its statement, the Fed said economic activity expanded at a strong pace in the third quarter. In their September meeting statement, policymakers said the economy had expanded at a solid pace.

Although recent inflation readings have dropped below 4%, the Federal Reserve is not declaring a win over inflation, said Jerome Powell in his speech today. “A few months of good data are only the beginning of what it will take to build confidence that inflation is moving down sustainably toward our goal. The process of getting inflation sustainably down to 2% has a long way to go”.

According to Powel, financial conditions have tightened significantly in recent months, driven by higher longer-term bond yields, among other factors, but the economy has remained resilient. The chair emphasized persistently tighter conditions.

Powell distanced himself from the “dot plot” of quarterly interest-rate projections last updated after the FOMC’s previous meeting in September, saying it only represented officials’ individual views at a particular point in time. He repeatedly said the committee was moving “carefully,” a wording that often signals a low likelihood of any immediate change in policy.

The market, both international and domestic, closed in green following the statement by the governor. Nifty and Sensex at the time of reporting were up. 74%

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