Fed admits change in stance, different views on rate cut roadmap

US Federal Reserve Chairman Jerome Powell acknowledged a change in the Fed's stance, saying the bank is starting to discuss the right time to ease monetary policy.

Thị trường kỳ vọng Fed ‘đóng băng’ lãi suất trong cuộc họp sắp tới

Fed Chairman Jerome Powell acknowledged a change in the Fed's stance.

After the Fed's policy meeting ended, opening up the possibility of interest rate cuts next year, New York Fed President John Williams made a statement that went against this forecast.

In an interview with CNBC on December 15, Mr. Williams, the first Fed official to speak after the meeting, said: "We (the Fed) have not really discussed lowering interest rates at this time."

He said it was “too early to think about that,” as the Fed is still considering whether current monetary policy is appropriate to bring inflation back to its 2% target.

Earlier, in a press conference after the two-day meeting, Fed Chairman Jerome Powell acknowledged a change in the Fed's stance, saying that the bank is starting to discuss the appropriate time to ease monetary policy. According to forecasts by Fed officials, interest rates could fall by 0.75 percentage points in 2024, to around 4.5-4.75% by the end of 2024.

Williams' comments caused some turmoil in markets, but overall markets remained firm on expectations that the Fed would begin cutting rates in March. The CME's FedWatch tool shows a high probability of a rate cut in March, but there are mixed views on the path of rate cuts beyond that point.

In an interview with Reuters on December 16, Atlanta Fed President Raphael Bostic gave a somewhat different outlook for monetary policy than the market expected. According to him, the Fed is likely to cut interest rates in the third quarter of 2024. The official said that inflation as measured by the personal consumption expenditures (PCE) price index will be around 2.4% by the end of next year, enough to move towards the 2% target, thereby creating conditions for the Fed to cut interest rates by 0.5 percentage points in the second half of 2024.

Meanwhile, in an interview with the Wall Street Journal , Chicago Fed President Austan Goolsbee said there was a growing possibility that the Fed would need to shift its focus from inflation to employment. He said he did not rule out the possibility of the Fed cutting interest rates next March.

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