FOMC Update
December 13, 2023
As predicted, the FOMC did not change its benchmark rate range from 5.25-5.50%. This marks the third consecutive pause, marking the end of the cycle. The updated forecast projects at least 3 rate cuts over the next 12 months totaling over 75bp to 4.60% by the end of 2024.Rates and Market:
- Fed Funds Target: 5.25%-5.50%
- Market Reaction: The release was viewed as a dovish direction; S&P 500 ticked up by 0.08% and 10Y US Treasury yields dropped to the lowest level since early September. The market is pricing an 88% likelihood that the fed funds target at the January 31, 2024 meeting will remain the same.
The FOMC announced the following actions and analysis:
- Unanimous policy vote
- The Fed noted that ‘economic activity has “slowed” from its strong pace in the third quarter’.
- The Fed highlighted that ‘inflation has “eased” over the past year but remains elevated.”
- The committee will continue to reduce the balance sheet by $95B each month as previously stated.