US FOMC Meeting - 12 - 13 December 2023

Fed holds rate steady again, signals policy pivot and sees three rate cuts in 2024

In line with market expectation, the US Federal Open Market Committee (FOMC) unanimously left its policy rate unchanged at 5.25%-5.50% for the third straight meeting this year.

Our take: Although the Fed expect to start cutting rates three times next year, it implies fewer rate cuts than what the market have priced in. This in a way suggest that the Fed is moving closer to easing and tilting towards dovish from a hawkish stance.

Fed speak: The committee's policy statement explicitly acknowledged that inflation "has eased over the past year," and added that they will closely monitor the economy to determine if "any" additional rate hikes are necessary. This suggest that, after a period of aggressive tightening and a bias towards moving rates higher, they may not need additional rate hikes.