Fed Likely to Hold Rates Steady in January But Opening Door to Cuts in 2024
• Interest rates expected to be held at current 5.25%-5.50% level at January Fed meeting, but markets see 40% chance of a cut in March • Fed Governor Waller shared optimistic economic outlook but wants more confirmation that inflation is sustainably at 2% target • With inflation cooling, real interest rates have become more restrictive, tempting Fed to cut rates soon • Fed likely to start softening language at January meeting to signal rate cuts in 2024 are likely if no surprises • Markets see rate cuts as highly likely by early summer 2024, but timing of any cuts (March or later) still uncertain