The Federal Open Market Committee elected not to change interest rates for a third straight meeting.
The FOMC announced Wednesday after its December meeting it was keeping the target rate at 5.25 to 5.5 percent. The pause in rate hikes followed the Federal Reserve’s aggressive approach to rein in inflation, which peaked above 9 percent. The Fed raised rates by 525 basis points since early 2022.
“We decided to leave our policy interest rate unchanged and to continue to reduce our securities holdings,” said Jerome Powell, Federal Reserve chairman.
Powell stated rates have likely topped out. The FOMC members also expect rates to decrease as early as next year.
“FOMC participants wrote down their individual assessments of an appropriate path for the federal funds rate based on what each participant judges to be the most likely scenario going forward,” Powell said. “While participants do not view it as likely to be appropriate to raise interest rates further, neither do they want to take the possibility off the table. If the economy evolves as projected, the median participant projects that the appropriate level of the federal funds rate will be 4.6 percent at the end of 2024, 3.6 percent at the end of 2025, and 2.9 percent at the end of 2026, still above the median longer-term rate. These projections are not a Committee decision or plan; if the economy does not evolve as projected, the path for policy will adjust as appropriate to foster our maximum employment and price stability goals.”
The decision on current rates follows a modest job report and encouraging consumer price index data.
Unemployment for November was 3.7 percent and the economy added 199,000 jobs.
The annual inflation rate cooled to 3.1 percent in November from 3.2 in October, according to new data from the Bureau of Labor Statistics. It is down from 3.7 percent in September.
The core index, minus the volatile food and energy categories, stayed at 4 percent for the second straight month.
“As we approach the end of the year, it is natural to look back on the progress that has been made toward our dual mandate objectives. Inflation has eased from its highs, and this has come without a significant increase in unemployment. That is very good news. But inflation is still too high, ongoing progress in bringing it down is not assured, and the path forward is uncertain. As we look ahead to next year, I want to assure the American people that we are fully committed to returning inflation to our 2 percent goal.”
Powell pointed out that economists are not declaring victory against a recession, while the economy has avoided large-scale job losses during a cooling.
“I have always felt, since the beginning, that there was a possibility, because of the unusual situation, that the economy could cool off in a way that enabled inflation to come down without the kind of large job losses that have often been associated with high inflation and tightening cycles,” Powell said. “So far, that’s what we’re seeing. That’s what many forecasters on and off the committee are seeing. This result is not guaranteed. It is far too early to declare victory, and there are certainly risks.”
Interest rates for used vehicles are up significantly from 2022, with the series of interest rate hikes. According to Experian’s third-quarter report, the average rate was 11.35 percent, up from 9.38 percent in the third quarter of 2022. The rate was at 8.06 percent in 2021.
The average monthly payment is up $4 in the past year at $533, though the prices for vehicles have dropped from $28,684 to $27,167.
