The Federal Reserve wrapped up its final meeting of 2023 with an early Christmas present to Wall Street. The Fed kept interest rates unchanged, but also confirmed the markets' belief that rate cuts are ahead in 2024. In fact, the Fed's so-called "dot plot," which projects where interest rates will be at various points in the future, is predicting three rate hikes next year, one more than analysts were projecting. That news sent the stock market soaring Wednesday afternoon, with the Dow closing at an all-time high of just over 37,000.
Federal Reserve Chairman Jerome Powell struck a more dovish tone at his post-meeting news conference, but still urged a cautious approach moving forward. "Inflation is still too high, ongoing progress in bringing it down is not assured, and the path forward is uncertain," said Powell.
Indeed, the latest consumer price index out this week shows the annual inflation rate still at 3.1%, more than a point above the Fed's target. "We're fully committed to returning inflation to our two percent goal," continued Powell. "Restoring price stability is essential to achieve a sustained period of strong labor market conditions."
Despite Powell's measured remarks, the markets are running with what they see as the fuel for a soft landing in the overall economy. Jeremy Siegel, professor at the Wharton School of Finance, told Fox Business he expects rate cuts to come sooner rather than later. "When will they start cutting rates...I don't think it's going to be at the January 31st meeting, but very honestly I think it's going to be the March meeting and I think the data will support it at that time," he said.
If that happens, Siegel believes the economy could avoid a recession altogether. "Bring rates down, encourage borrowing and lending...that gets deposits up, that gets the money supply up, and that will ensure that we have a good 2024," he said.