The Federal Reserve in December gave the market a big dovish surprise, which held its key interest rate steady for the third straight time and set the table for multiple cuts to come in 2024 and beyond.
The latest policy decision sent a strong signal to the market, that is the inflation rate is easing and the economy is holding in. And the market reacted very positive, Dow made the record high, and 10-year yield was down sharply.
Along with the decision to stay on hold, committee members penciled in at least three rate cuts in 2024, assuming quarter percentage point increments. That's more aggressive than what officials had previously indicated.
Does the latest move from the Fed mean that the inflation battle is over? Markets had widely anticipated the decision to stay put, which could end a cycle that has seen 11 hikes, pushing the fed funds rate to its highest level in more than 22 years. There was uncertainty, though, about how ambitious the FOMC might be regarding policy easing.
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