On December 13, Eastern Time, the Federal Reserve released its last interest rate decision of the year。Following the announcement, the FOMC decided to maintain the target range for the federal funds rate at 5.25% -5.5%。This is the third consecutive time the Fed has left interest rates unchanged, in line with market expectations.。

At the same time, the Fed announced that it would continue to maintain other policy rates.。Maintain reserve rate at 5.4%; maintain overnight repo rate at 5.5%; maintain overnight reverse repo rate at 5.3%; maintain the primary credit rate at 5.5%, all in line with market expectations。In terms of tapering, the Fed continued its original plan to passively scale back $60 billion of Treasuries and $35 billion of agency bonds and MBS each month.。

December interest rate resolution announcement: many new dovish language

Specifically looking at the resolution announcement, the Fed's overall economic and policy description section changed little, but added a lot of dovish language。For example, in describing the pace of economic growth, the Fed intends to propose that "growth is slower than in the third quarter"; in inflation, the Fed clearly states that "inflation has cooled over the past year";。

However, the Fed also said that in assessing the appropriate monetary policy stance, the committee will continue to monitor the impact of new information on the economic outlook.。The Fed said the committee would be prepared to adjust its monetary policy stance as appropriate if there were risks that could hinder the achievement of the committee's goals。The Committee's assessment will consider a wide range of information, including labour market conditions, inflationary pressures and inflation expectations, as well as financial and international progress.。

Affected by the news, the three major U.S. stock indexes rose sharply on the day, all hitting new 52-week highs, with the Dow hitting new all-time highs。Among them, the Dow rose 512.30 points to close at 37,090.24 points, up 1.40%。It was the first time the index closed above 37,000 points, surpassing the record set in January 2022.。Dow hits intraday high of 37,094.85 points。S & P 500 up 1.37% to 4707.09 points, which is also the first time the index has exceeded 4,700 points since January 2022.。Nasdaq Composite Index Up 1.38%, closed at 14,733.96 points。

In the bond market, the 10-year U.S. bond yield fell 18bp to 4 after the 10-year meeting decision was announced..02%, the current round of U.S. bond yields from the October 19 high of 4.98% so far down close to 100bp。Under the spread logic, the dollar index weakens。

Fed's December economic outlook: cumulative 75BP rate cut in 2024

There are also many changes in the Fed's December economic outlook, as disclosed this time, compared to September。Overall, Fed officials remain optimistic about the U.S. economy in general in 2024 and expect to open multiple rate cuts next year.。

In terms of economic growth, the Federal Reserve significantly revised its U.S. growth forecast for 2023, from 2.1% up to 2.6%, and slightly revised down the 2024 U.S. economic growth forecast 0.1 percentage point to 1.4%。

On the inflation front, the Fed significantly revised down its 2023 U.S. PCE inflation forecast and core PCE inflation forecast, both by 0.5 percentage points, respectively 2.8% and 3.2%; also slightly revised down the 2024 U.S. PCE inflation forecast and core PCE inflation forecast to 2.4% and 2.4%, the downward revision is 0.1-0.2 percentage points。The Fed's inflation target is 2%.。

On the employment front, the Fed kept the unemployment rate at 4 in both 2024 and 2025 against the backdrop of a resilient job market..1%, the unemployment rate is raised to 4 in 2026.1%, close to the Fed's view of the natural unemployment rate (4%)。

In terms of interest rates that the market is concerned about, according to this dot plot, Fed officials have a median policy rate forecast of 4 for 2024..5-4.75%, corresponding to a cumulative rate cut of 75 BP; median interest rate forecast for 2025 at 3.5-3.75%, corresponding to a cumulative rate cut of 100BP during the year; median policy rate forecast for 2026 is 2.75-3%, still above 2.5% long-term interest rate level。

Although the Fed's interest rate cut schedule has not been explicitly mentioned, but according to CME "Fed Watch": the Fed will keep interest rates at 5 in February next year..25% -5.The probability of the 50% interval being constant is 83.5%, the probability of a 25 basis point rate hike is 0%, and the probability of a 25 basis point rate cut is 16.5%。The probability of keeping interest rates unchanged by March next year is 20.9%, with a cumulative probability of a 25 basis point cut of 66.7%, with a cumulative probability of a 50 basis point rate cut of 12.4%。

Powell: Rate cuts are beginning to come into view Monetary policy making does not take political events into account

At this press conference, Powell's attitude changed significantly compared to before.。

Regarding the interest rate decision, Powell said that the committee is currently acting cautiously and cannot explicitly rule out the possibility of a current rate hike, a view that is consistent with the interest rate statement.。Powell said the level of interest rates has entered restrictive territory, however, if conditions are right, ready to tighten monetary policy further, policymakers do not want to rule out the possibility of further rate hikes, but Powell himself believes that the possibility of a rate hike next year is slim。The Fed may not rush to adjust its benchmark interest rate in the short term, comments say。

On inflation, Powell said the committee remains committed to its 2 percent target, inflation, while still high, has eased significantly, and we welcome this progress, but need to see more。"Polls show that the average American is still living with high prices, which is something people don't like.。"

For the future path of interest rate cuts, Powell pointed out that interest rate cuts have begun to enter the horizon, policymakers are thinking, discussing when it is appropriate to cut interest rates。Looking ahead, rate cuts have inevitably become a theme。"When is the right time to start loosening existing policy constraints, and the question is starting to come into view, is clearly a topic that is being discussed globally and one that we are discussing today at the conference."。"

Powell also said the Fed is willing to cut interest rates even if there is no recession。And won't wait until 2% inflation to cut rates because that will be too late, it will exceed the target, and it will take a while for policy to affect the economy。

For the reference to a soft landing, Powell believes that there is little reason to think that the economy will fall into recession, but can not rule out unexpected events next year, this possibility always exists, and if there is a recession will seriously affect the decision to cut interest rates.。It would qualify as an "economic soft landing" if inflation could be reduced to 2% without causing a significant increase in unemployment, but Powell is clearly not ready to declare that victory.。

On the labor market, Powell said, "Job growth remains strong, but given population growth and labor force participation, job growth is falling back to more sustainable levels, and the era of severe labor shortages is over."。"

2024 will soon be an election year in the United States, and Powell stressed: "Commissioners do not consider political events..We can't do that, the FOMC focuses only on the economic side and thus determines monetary policy。Currently, stubbornly high prices and the Fed's aggressively high interest rates have sent approval ratings down for current U.S. President Joe Biden, who three days ago called on the Fed not to raise interest rates further because of the strong jobs data, marking a rare comment by Biden on the Fed's policymaking.。

Attached: Full text of the Federal Reserve's December interest rate resolution statement