The Federal Reserve said Wednesday it will hold interest rates steady at a 22-year high for the third consecutive meeting, as US economic growth slows and investors look toward the beginning of rate cuts sometime next year.
The Fed has raised rates 11 times since March 2022 to combat high inflation, which has slowed markedly after hitting a four-decade high last summer.
Still, the central bank hasn’t crossed the finish line just yet. Fed officials are expecting inflation to cool next year at a slightly faster pace than previously estimated, according to their latest set of economic projections, released Wednesday.
Some economists say the final mile of the Fed’s historic inflation fight will be the most difficult. In his post-meeting news conference, Fed Chair Jerome Powell reiterated that additional rate hikes remain on the table.
As expected, the Fed chief got peppered with questions from reporters on the central bank’s approach to cutting rates.
Powell said “no one is declaring victory” just yet, and that doing so would be “premature,” but he admitted that officials are, at the very least, already discussing rate cuts.
“The question of when will it become appropriate to begin dialing back policy, that begins to come into view and is clearly a topic of discussion now in the world and was also a discussion for us at our meeting today,” Powell said.
A key question for the Fed early next year will be: What are the criteria for rate cuts?
Powell said “you want to be reducing restriction on the economy well before 2%.” He said that waiting to cut rates until inflation reaches 2% would “be too late.”