Minutes from the U.S. Federal Reserve’s last meeting held in December show a high degree of uncertainty among policymakers when it comes to the timing of interest rate cuts in 2024.
At the meeting, central bank officials agreed to hold their benchmark interest rate steady in a range of 5.25% to 5.50%. Members indicated during the meeting that they expect three quarter-percentage point rate cuts by the end of this year.
However, the meeting notes show a high level of uncertainty regarding the U.S. economy and when interest rates are likely to start being lowered.
Officials agreed that progress that has been made in bringing down inflation. They also are pleased with the progress made in bringing the labour market into balance.
Individual members of the Fed expect interest rate cuts over the next three years to bring the trendsetting overnight rate back down to about 2%.
But the meeting minutes noted an “unusually elevated degree of uncertainty” about the policy path forward.
Several officials said that it might be necessary to keep interest rates elevated if inflation doesn’t co-operate, and others noted the potential need for more rate hikes in coming months.
“Participants generally stressed the importance of maintaining a careful and data-dependent approach to making monetary policy decisions and reaffirmed that it would be appropriate for policy to remain at a restrictive stance for some time…” read the meeting minutes.
Despite the caution, the stock market expects the U.S. central bank to cut aggressively in 2024, beginning in March.
Futures traders are betting on six quarter-point rate cuts this year, which would take the Fed Funds Rate down to a range of 3.75% to 4.00%.
