Federal Reserve Holds Policy Steady, but Indicates More Dovish 2024

The U.S. Federal Reserve as expected on Wednesday held its benchmark fed funds rate range steady at 5.25%-5.50%, but at the same time trimmed its rate outlook for year-end 2024 to 4.6% from 5.1%.

"Tighter financial and credit conditions for households and businesses are likely to weigh on economic activity, hiring, and inflation," said the central bank's accompanying statement. "The extent of these effects remains uncertain."

Alongside the interest rate announcement, the Fed also released its quarterly update of economic projections. The central bank now expects 2023 to end with a core inflation rate of 3.2% versus 3.7% expected three months earlier. The end rate for 2024 is now seen at 2.4% versus 2.6% previously. Real GDP growth for 2024 has been trimmed to 1.4% from 1.5%.

The Fed now sees its fed funds rate ending 2024 at just 4.6% against 5.1% expected three months earlier, suggesting 75 basis points of rate cuts next year.

The price of bitcoin [BTC] added just less than 1% to previous Wednesday gains, now higher by 2.2% to $42,370. A check of traditional markets finds rates tumbling, with the 10-year Treasury yield down 12 basis points to 4.08%, its lowest level since August. U.S. stock market averages have moved to session highs, the S&P 500 now up 0.6%. The price of gold is higher by just less than 1% to $2,013 per ounce and the dollar index is lower by about 0.5%.

Fed Chair Jerome Powell will hold a post-meeting press conference at 2:30 pm ET at which market watchers will look for additional clues about the future path of monetary policy. Prior to today, markets overwhelmingly didn't expect any moves at the Fed's late January meeting, but nearly 50% anticipated a rate cut at the following meeting in March, according to the CME FedWatch tool.