<p>Federal Reserve officials on Wednesday left interest rates unchanged in their final policy decision of 2023 and forecast that they will cut borrowing costs three times in the coming year, a sign that the central bank is shifting toward the next phase in its fight against rapid inflation.</p><p>Interest rates are now set to a range of 5.25% to 5.5%, where they have been since July. After making a rapid series of increases that started in March 2022 and pushed borrowing costs to their highest level in 22 years as of this summer, officials have now held policy steady for three straight meetings.</p><p>Policymakers are striking that patient stance to give themselves time to assess whether interest rates are high enough to weigh on the economy and ensure that inflation will slow to the Fed’s 2 per cent target over time. Price increases have been cooling for months and hiring has slowed, which has been giving officials more confidence that their current setting may be sufficient.</p><p>Investors are watching closely for any hint at when — and how much — interest rates will fall. Fed policymakers projected Wednesday that they will lower borrowing costs to 4.6 per cent by the end of 2024, down notably from their previous 5.1 per cent estimate. The forecast implies that officials will make three rate cuts next year. That call for lower rates was widespread: Not a single Fed official expected interest rates to be higher at the end of next year.</p><p>The Fed’s quarterly economic projections, the first set it has released since September, also showed that central bankers expect inflation to fade slightly more quickly than officials had previously forecast.</p><p>Even as Fed officials laid out an optimistic vision of the future — one that suggests they may well pull off a “soft landing,” cooling inflation without painful economic consequences — policymakers did not firmly declare victory. They kept alive the possibility of further rate increases if inflation should prove stubborn.</p><p>“Recent indicators suggest that growth of economic activity has slowed from its strong pace in the third quarter,” Fed officials said in their statement, noting that inflation had “eased over the past year” but “remains elevated,” and promising to watch a broad array of data to determine the extent of “any additional policy firming that may be appropriate.”</p>
<p>Federal Reserve officials on Wednesday left interest rates unchanged in their final policy decision of 2023 and forecast that they will cut borrowing costs three times in the coming year, a sign that the central bank is shifting toward the next phase in its fight against rapid inflation.</p><p>Interest rates are now set to a range of 5.25% to 5.5%, where they have been since July. After making a rapid series of increases that started in March 2022 and pushed borrowing costs to their highest level in 22 years as of this summer, officials have now held policy steady for three straight meetings.</p><p>Policymakers are striking that patient stance to give themselves time to assess whether interest rates are high enough to weigh on the economy and ensure that inflation will slow to the Fed’s 2 per cent target over time. Price increases have been cooling for months and hiring has slowed, which has been giving officials more confidence that their current setting may be sufficient.</p><p>Investors are watching closely for any hint at when — and how much — interest rates will fall. Fed policymakers projected Wednesday that they will lower borrowing costs to 4.6 per cent by the end of 2024, down notably from their previous 5.1 per cent estimate. The forecast implies that officials will make three rate cuts next year. That call for lower rates was widespread: Not a single Fed official expected interest rates to be higher at the end of next year.</p><p>The Fed’s quarterly economic projections, the first set it has released since September, also showed that central bankers expect inflation to fade slightly more quickly than officials had previously forecast.</p><p>Even as Fed officials laid out an optimistic vision of the future — one that suggests they may well pull off a “soft landing,” cooling inflation without painful economic consequences — policymakers did not firmly declare victory. They kept alive the possibility of further rate increases if inflation should prove stubborn.</p><p>“Recent indicators suggest that growth of economic activity has slowed from its strong pace in the third quarter,” Fed officials said in their statement, noting that inflation had “eased over the past year” but “remains elevated,” and promising to watch a broad array of data to determine the extent of “any additional policy firming that may be appropriate.”</p>