Kevin Dietsch/Getty Images
The nation's central bank has concluded another year of tackling the country's post-pandemic inflation.
On Wednesday, the Federal Open Market Committee announced it would be continuing its pause on interest rate hikes in its final decision of 2023, holding its benchmark rate steady in a range between 5.25% and 5.5%. The announcement comes just one day after the Federal Reserve received another promising sign of cooling inflation — the Consumer Price Index, which measures inflation, rose 3.1% year-over-year, down from October's reading of 3.2%.
While the CPI reading is still above the Fed's 2% inflation goal, proof that inflation is slowing is just what the central bank needs as confirmation that the country is moving in the right direction, with potential rate cuts as a possibility in the new year.
Fed Chair Jerome Powell hasn't indicated when the Fed might cut rates — as he said during the November press conference, it's not something the FOMC is discussing right now. But he acknowledged the Fed's work to fight inflation has been successful during a December discussion at Spelman College.
"The forcefulness of our response to inflation also helped maintain the Fed's hard-won credibility, ensuring that the public's expectations of future inflation remain well-anchored," he said. "Having come so far so quickly, the FOMC is moving forward carefully, as the risks of under- and over-tightening are becoming more balanced."
While it's impossible to predict how the economy will fare in 2024, Treasury Secretary Janet Yellen said during a Wall Street Journal summit on Tuesday that she believes the US is on a path toward a soft landing, in which the country can continue fighting inflation while avoiding a severe economic downturn.
Inflation is "certainly meaningfully coming down," Yellen said. "And I see no reason, on the path that we're currently on, why inflation shouldn't gradually decline to levels that are consistent with the Fed's mandate and targets. I personally don't see any good reason to think that the last mile is going to be especially difficult."
Yellen also noted that when it comes to a recession hitting the US, she doesn't see a "solid intellectual basis for making such a prediction."
Still, some recession concerns for 2024 are in the air — UBS economists, for example, wrote in a recent note that they expect a recession in the second or third quarter of 2024 due to "the ongoing slowdown in both headline and core inflation." As a result, they predict the Fed will cut rates.
Bank of America CEO Brian Moynihan, however, predicted a slowdown — but no recession.
"Our research team is the best in the business and they have moved to the soft landing category," he told Reuters last month. "They have a slowdown in the economy in the middle of next year."
