Federal Reserve Keeps Interest Rates Unchanged, Indicates Conclusion of Rate Hikes

• The Federal Reserve maintained the federal funds rate at a constant 5.25% – 5.5%.
• The Fed's economic forecasts underwent significant changes compared to the September edition.
• Stocks are surging as traders get ready for potential interest rate reductions in the first half of next year.  

On December 13, the Federal Reserve issued its FOMC statement, confirming its decision to keep the target range for the federal funds rate at 5.25% – 5.50%, aligning with the consensus among analysts.

A significant shift was also observed in the Fed's economic projections compared to the September release. The federal funds rate projection for 2024 was amended from 5.1% to 4.6%, and the projection for 2025 decreased from 3.9% to 3.6%.

In terms of unemployment rate expectations for 2024, they remained at 4.1%, while the change in real GDP decreased from 1.5% to 1.4%.

Additionally, core PCE inflation projections were adjusted from 3.7% to 3.2% for 2023 and from 2.6% to 2.4% for 2024.

The U.S. Dollar Index retreated below the 103.30 level as traders reacted to the Fed’s economic projections, which suggest a more aggressive rate cut approach in 2024.

Gold surged towards the $2,000 mark as lower yields are seen as positive for precious metals.

The S&P 500 reached new highs at 4680 following the dovish stance of the Fed, which is a major bullish factor for stocks.

It's important for traders to be aware that Powell’s press conference is about to commence, and the markets will be highly responsive to his remarks. At first glance, it appears that the Fed is prepared to reduce rates in the first half of next year.