The Fed announced on Wednesday following its interest rate meeting in Washington that the key interest rate remains in a range of 5.25 to 5.50 percent. After some aggressive interest rate hikes, the monetary authorities are keeping their feet still for the third meeting in a row. Bank economists had expected this decision. The Fed has lowered its growth forecast for 2024.
The Fed had already not touched its interest rates in September and November. The Fed last tightened its monetary policy by 0.25 percentage points in July to combat inflation. In March 2022, the key interest rate was still in a range of 0.0 to 0.25 percent.
At the same time, the monetary authorities signal in their interest rate outlook for 2024 that the key monetary policy rate is likely to fall over the next year – by 0.75 percentage points. None of the monetary authorities see interest rates at the end of next year being higher than they are now.
Growth forecast lowered
For the coming year, the Fed expects economic growth to be slightly lower than expected three months ago. The gross domestic product (GDP) of the world’s largest economy is expected to grow by 1.4 percent, as the Fed announced in Washington on Wednesday. That would be 0.1 percentage points less than forecast in September. For this year, the Fed is forecasting growth of 2.6 percent (September 2.1).
The central bank also assumes lower inflation rates. Inflation is expected to average 2.4 percent in 2024, a decline of 0.1 percentage points compared to the previous forecast in September, central bank data showed on Wednesday. The Fed expects an inflation rate of 2.8 percent this year.
Core inflation, i.e. without taking food and energy prices into account, is expected to be 2.4 percent next year (September: 2.6 percent). The Fed is committed to the goals of price stability and full employment and aims for an inflation rate of 2 percent.
