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    What to Watch at the Fed’s Final Meeting of 2023

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    Federal Reserve officials are widely expected to leave interest rates unchanged, but economists will watch for hints at what’s next.Federal Reserve officials will wrap up a year of aggressive inflation fighting on Wednesday afternoon, when they are expected to use their final policy decision of 2023 to leave interest rates at their highest level in 22 years.The Fed is finishing the year on pause after the most intense campaign of interest rate increases in decades, one meant to snuff out the rapid price gains that have been bedeviling consumers since 2021.Because inflation has now moderated substantially, central bankers have increasingly signaled that they may be done raising borrowing costs, which are set to a range of 5.25 to 5.5 percent. The question investors will be focused on Wednesday is how much rates are expected to come down in 2024 — and when those cuts might begin.The Fed will release its statement and a fresh set of quarterly economic projections at 2 p.m., followed by a news conference with Jerome H. Powell, the Fed chair, at 2:30 p.m. Here’s what to watch.We are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber?  More

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    Inflation Holds Roughly Steady Ahead of Fed Meeting

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    Consumer prices rose 3.1 percent in the year through November, and a closely watched core index was roughly the same rate as the previous month.Inflation data released on Tuesday showed that price increases remained moderate in November, the latest sign that inflation has cooled substantially from its June 2022 peak. That’s likely to keep the Federal Reserve on track to leave interest rates unchanged at its final meeting of the year, which takes place this week.The Consumer Price Index came out just hours before the Fed began its two-day gathering, which will conclude with the release of an interest rate decision and a fresh set of quarterly economic projections at 2 p.m. on Wednesday. Jerome H. Powell, the Fed chair, is then scheduled to hold a news conference.Central bankers have embraced a recent slowdown in price increases, and Tuesday’s data largely suggested that inflation remains lower than earlier this year. Overall inflation climbed 0.1 percent on a monthly basis, making for a 3.1 percent increase compared to a year earlier.That was cooler than 3.2 percent in October, and it is down notably from a peak above 9 percent in the summer of 2022.But some of the report’s underlying details could keep Fed officials wary as they contemplate what to do next with interest rates. Investors expect central bankers to begin lowering borrowing costs within the first half of 2024, though officials have been trying to keep their options open.After stripping out volatile food and fuel to give a clearer sense of underlying inflation trends, so-called core inflation climbed more quickly on a monthly basis. And a closely watched measure that tracks housing expenses also climbed more quickly; that measure is called “owners’ equivalent rent” because it estimates how much it would cost someone to rent a home that they own, and economists have been expecting it to decline.“It reinforces this idea that it’s going to be a bumpy road to disinflation,” said Blerina Uruci, chief U.S. economist at T. Rowe Price. “The Fed cannot cut interest rates too soon in the face of resilient services inflation.”Core inflation was up by 4 percent compared to a year earlier, holding steady from October. That pace remains well above the roughly 2 percent pace that was normal before the onset of the pandemic. More

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    What’s Next for Interest Rates? An Era of ‘Peak Uncertainty.’

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    Federal Reserve officials could keep all options on the table at their meeting this week, even as data shape up according to plan.When Jerome H. Powell, the Federal Reserve chair, takes the stage at his postmeeting news conference on Wednesday, investors and many Americans will be keenly focused on one question: When will the Fed start cutting interest rates?Policymakers raised borrowing costs sharply between March 2022 and July, to a 22-year high of 5.25 to 5.5 percent, in a bid to wrestle rapid inflation under control by cooling the economy. They have paused since then, waiting to see how the economy reacted.But with inflation moderating and the job market growing at a more modest pace, Wall Street increasingly expects that the Fed could start cutting interest rates soon — perhaps even within the first three months of 2024.Fed officials have been hesitant to say when that might happen, or to even promise that they are done raising interest rates. That’s because they are still worried that the economy could pick back up or that progress taming inflation could stall. Policymakers do not want to declare victory only to have to walk that back.Mr. Powell is likely to strike a noncommittal tone this week given all the uncertainty, economists said. After their decision on Wednesday, Fed officials will release a fresh quarterly Summary of Economic Projections showing where they think rates will be at the end of 2024, which will indicate how many rate cuts they expect to make, if any. But the projections will offer few hints about when, exactly, any moves might come.And both the Fed’s forecasts and Wall Street’s expectations could mask a stark reality: There is a wide range of possible outcomes for interest rates next year, depending on what happens in the economy over the next couple of months.We are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber?  More

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    Jerome Powell Says It’s Too Soon to Guess When Rates Will Drop

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    The Federal Reserve chair said officials could still raise rates “if” that becomes necessary, and that it’s too soon to guess when they will ease.Jerome H. Powell, the chair of the Federal Reserve, suggested on Friday that the central bank may be done raising interest rates if inflation and the economy continue to cool as expected, saying that central bankers could raise interest rates further if that became necessary.“It would be premature to conclude with confidence that we have achieved a sufficiently restrictive stance, or to speculate on when policy might ease,” Mr. Powell said in a speech at Spelman College. “We are prepared to tighten policy further if it becomes appropriate to do so.”Mr. Powell’s comments are likely to cement an already-widespread expectation that the Fed will leave interest rates unchanged at its meeting on Dec. 12 and 13. The Fed has already raised interest rates to a range between 5.25 and 5.5 percent, up sharply from near-zero as recently as March 2022. Those higher borrowing costs are weighing on demand for mortgages, car loans and business debt, cooling the economy in a bid to lower inflation.Given how high interest rates are now, the Federal Open Market Committee has paused its rate increases for several months. Investors have increasingly come to expect that its next move would be to cut rates — though Fed officials have been hesitant to declare victory, or to confidently predict exactly when lower borrowing costs could arrive.The Fed can “let the data reveal the appropriate path,” Mr. Powell said. “We’re getting what we wanted to get, we now have the ability to move carefully.”The Fed will release fresh economic projections after the December meeting. Those will show where policymakers expect rates to be at the end of 2024. That will give investors a hint at how much officials expect to lower interest rates next year, but little insight into when the cuts might commence.Policymakers want to avoid setting interest rates in a way that crushes the economy, risking much-higher unemployment and a recession. But they also want to be sure to fully stamp out rapid inflation, because if price increases are allowed to run too hot for too long, they could become entrenched in the way that consumers and companies behave. That would make rapid inflation even more difficult to get rid of in the longer run.After months of choppy progress, the Fed has recently received a spate of data suggesting that it is making meaningful progress toward achieving its goals.Inflation has been moderating noticeably, and the slowdown is coming across a range of products and services. The job market has cooled from white-hot levels last year, although companies are still hiring. Consumer spending is showing some signs of deceleration, though it has not fallen off a cliff.All of those signals are combining to give central bankers more confidence that interest rates may be high enough to bring inflation back toward their 2 percent goal within a couple of years. In fact, the data are shoring up optimism that they might be able to pull off a historically rare “soft landing”: Cooling inflation gently and without inflicting serious economic pain.“There’s a path to getting inflation back down to 2 percent without that kind of large job loss,” Mr. Powell said, explaining that he believes a gentle cooling is possible. “We’re on that path.”Still, inflation has cooled before, only to pick back up, and the staying power of consumer spending has surprised many economists. Given that, officials do not want to celebrate prematurely.“As the demand- and supply-related effects of the pandemic continue to unwind, uncertainty about the outlook for the economy is unusually elevated,” Mr. Powell said Friday.The Fed, he said, “is strongly committed to bringing inflation down to 2 percent over time, and to keeping policy restrictive until we are confident that inflation is on a path to that objective.” More

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    Climate Protesters Get in Fed’s Face as Policy Clash Grows Louder

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    Jerome H. Powell, the central bank’s chair, has been interrupted recently by a climate group that thinks disruption will win the day.A video of security officers wrestling a protester to the floor in the lobby of the Jackson Lake Lodge in Wyoming, outside the Federal Reserve’s most closely watched annual conference, clocked more than a million views.A protest that disrupted a speech by Jerome H. Powell, the Fed chair, at the Economic Club of New York this fall generated extensive coverage. And when the activists showed up again at Mr. Powell’s speech at the International Monetary Fund in early November, they seemed to get under his skin: The central bank’s usually staid leader was caught on a hot mic using a profanity as he told someone to close the door.All three upheavals were caused by the same group, Climate Defiance, which a now-30-year-old activist named Michael Greenberg founded in the spring. Mr. Greenberg had long worked in traditional climate advocacy, but he decided that something louder was needed to spur change at institutions like the Fed.“I realized there was a big need for disruptive direct action,” he explained in an interview. “It just gets so, so, so, so, so much more attention.”The small but noisy band of protesters dogging the Fed chair is also spotlighting a problem that the central bank has long grappled with: precisely what role it should play in the world’s transition to green energy.Climate-focused groups often argue that as a regulator of the nation’s largest banks, the Fed should play a major role in preparing the financial system for the damaging effects of climate change. Some want it to more overtly discourage bank lending to fossil fuel companies. Mr. Greenberg, for instance, said he would like the Fed to use regulation to make lending to oil and gas companies essentially cost-prohibitive.We are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber?  More

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    The Fed’s Preferred Inflation Measure Eased in October

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    The Personal Consumption Expenditures price index continued to cool and consumer spending was moderate, good news for the Federal Reserve.A closely watched measure of inflation showed continued signs of fading in October, encouraging news for the Federal Reserve as officials try to gauge whether they need to take further action in order to fully stamp out rapid price increases.The Personal Consumption Expenditures inflation measure, which the Fed cites when it says it aims for 2 percent inflation on average over time, climbed by 3 percent in the year through October. That was down from 3.4 percent the previous month, and was in line with economist forecasts. Compared with the previous month, prices were flat.After volatile food and fuel prices were stripped out for a clearer look at underlying price pressures, inflation climbed 3.5 percent over the year. That was down from 3.7 percent previously.The latest evidence that price increases are slowing came alongside other positive news for Fed officials: Consumers are spending less robustly. A measure of personal consumption climbed 0.2 percent from September, a slight slowdown from the previous month.The report could offer important insights to Fed officials as they prepare for their final meeting of 2023, which takes place Dec. 12-13. While investors widely expect policymakers to leave borrowing costs unchanged at the meeting, central bankers will release a fresh set of economic projections that could hint at their plans for future policy. Jerome H. Powell, the Fed chair, will also deliver a news conference.“They’re going to want to still stay cautious about declaring ‘Mission Accomplished’ too soon,” said Omair Sharif, founder of Inflation Insights. Still, “we’ve had a string of really good readings.”Policymakers have been closely watching how both inflation and consumer spending shape up as they assess how to proceed. They have already raised interest rates to a range of 5.25 to 5.5 percent, the highest level in more than two decades. Given that, many officials have signaled that it may be time to stop and watch how policy plays out.John C. Williams, the president of the Federal Reserve Bank of New York, hinted in a speech on Thursday that he expected inflation to moderate enough for the Fed to be done raising interest rates now, though officials could raise interest rates more if the data surprised them.“If price pressures and imbalances persist more than I expect, additional policy firming may be needed,” Mr. Williams said. He reiterated his assessment that the Fed is “at, or near, the peak level of the target range of the federal funds rate.”The economy has been more resilient to those higher borrowing costs than many expected, which is one reason that the Fed has maintained a wary stance. If strong demand gives companies the ability to keep raising prices without losing customers, it could be harder to fully vanquish inflation.That said, recent signs that consumers and companies are finally turning more cautious have been welcome at the Fed.“I am encouraged by the early signs of moderating economic activity in the fourth quarter based on the data in hand,” Christopher Waller, one Fed governor, said this week. He added that “inflation is still too high, and it is too early to say whether the slowing we are seeing will be sustained.”Mr. Sharif noted that the talk on Wall Street had coalesced around when the first interest rate decrease might come, and the Fed’s coming economic projections should offer insight. Some of Mr. Waller’s remarks this week fueled speculation that cuts could come on the early side next year.But “you don’t want to get too far ahead of your skis, for now,” Mr. Sharif said, noting that the data has gotten better in the past before worsening again. He doesn’t think that the Fed will want to start to talk about rate cuts too forcefully until it has data for late 2023 and early 2024 in hand.“I just think they’re going to want to stay a little bit cautious right now,” he said. More

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    Fed Officials Thought Rates Could Rise More if Inflation Stayed Stubborn

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    Minutes from the Federal Reserve’s early November meeting suggested another rate increase remained possible, but officials were in no hurry.Federal Reserve officials are contemplating whether they will need to raise interest rates again to cool the economy and ensure that rapid inflation will fully fade, and minutes from their meeting earlier this month laid out the contours of that debate.“Participants noted that further tightening of monetary policy would be appropriate if incoming information indicated that progress toward the committee’s inflation objective was insufficient,” according to minutes from the central bank’s Oct. 31-Nov. 1 meeting, which were released Tuesday.Fed officials thought that the “data arriving in coming months would help clarify the extent to which the disinflation process was continuing.”Central bankers voted to leave interest rates unchanged in a range of 5.25 to 5.5 percent at their gathering early this month, allowing themselves more time to assess whether their substantial rate moves so far are weighing on demand.Wall Street is keenly focused on what officials will do next. Fed policymakers had predicted one more 2023 rate move as of their September economic projections, but investors think that there is little chance they will raise rates at their final meeting of the year on Dec. 12-13. Tuesday’s minutes may serve to bolster that expectation of an extended pause, because they suggested that officials planned to watch how the economy shaped up over the course of “months.”Fed watchers are now trying to figure out whether officials are conclusively done raising interest rates and, if so, when they are likely to begin cutting them. Policymakers will publish a fresh set of quarterly economic forecasts at the conclusion of their December meeting. Those, together with remarks from Fed Chair Jerome H. Powell, could provide important clues about the future.As of September, policymakers expected to lower rates before the end of 2024. If that forecast stands and Mr. Powell hints that policymakers are not eager to raise rates again, investors may turn their full attention to just how soon rate cuts are coming. As of now, market pricing suggests that Wall Street expects policymakers to begin lowering interest rates at some point in the first half of 2024.But if Fed officials use the December economic projections to predict that rates could remain higher for longer — or if Mr. Powell suggests that a rate increase next year remains firmly on the table — it could keep the possibility of more action at least dimly alive. Several central bankers have been clear in recent weeks that they aren’t sure they are done raising interest rates.“I wouldn’t take additional firming off the table,” Susan Collins, the president of the Federal Reserve Bank of Boston, said in an interview on CNBC last week.The minutes from the Fed’s November gathering fleshed out how policymakers are thinking about the outlook. While officials wanted to make sure that they were cooling the economy enough to ensure that inflation would come back to their 2 percent goal in a timely way, they also wanted to avoid overdoing it by raising rates too much and risking a painful recession.Fed officials thought that “with the stance of monetary policy in restrictive territory, risks to the achievement of the committee’s goals had become more two-sided,” the minutes said, though “most participants continued to see upside risks to inflation.”Consumer Price Index inflation fell to 3.2 percent in October, down from a peak above 9 percent in summer 2022. Even so, officials are worried that it could prove difficult to wrestle inflation the rest of the way back to normal.Fed officials define their inflation target using a separate but related measure, the Personal Consumption Expenditures index, which comes out at more of a delay. The October P.C.E. figures are set for release on Nov. 30.Fed officials have been carefully watching strength in the job market and the economy as they try to figure out whether inflation is likely to come fully under control. If the economy retains too much vim — with consumers spending freely and businesses snapping up workers — companies may continue to raise prices at a faster clip than usual.Since their last meeting, the Fed has gotten some positive news on that front. While employers continued to hire in October, they did so at a much slower pace: They hired just 150,000 workers, and earlier hiring figures were revised lower.The minutes suggested that policymakers are watching for signs that “labor markets were reaching a better balance between demand and supply.” More

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    Fed Chair Recalls Inflation ‘Head Fakes’ and Pledges to Do More if Needed

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    Jerome H. Powell, the Federal Reserve chair, said officials would proceed carefully. But if more policy action is needed, he pledged to take it.Jerome H. Powell, the chair of the Federal Reserve, on Thursday expressed little urgency to make another interest rate increase imminently — but he reiterated that officials would adjust policy further if doing so proved necessary to cool the economy and fully restrain inflation.Mr. Powell and his Fed colleagues left interest rates unchanged in a range of 5.25 to 5.5 percent this month, up from near zero as recently as March 2022. The Fed has raised borrowing costs over the past year and a half to wrangle rapid inflation by slowing demand across the economy.Because inflation has faded notably from its peak in the summer of 2022, and because the Fed has already adjusted policy so much, officials are debating whether they might be done. Once they think rates are at a sufficiently elevated level, they plan to leave them there for a time, essentially putting steady pressure on the economy.Mr. Powell, speaking at a research conference in Washington hosted by the International Monetary Fund, reiterated on Thursday that policymakers wanted to make sure that rates were sufficiently restrictive. He said Fed officials were “not confident that we have achieved such a stance” yet.“We’re trying to make a judgment, at this point, about whether we need to do more,” Mr. Powell said in response to a question at the event. “We don’t want to go too far, but at the same time, we know that the biggest mistake we could make would be, really, to fail to get inflation under control.”He made clear that the Fed did not want to take a continued steady slowdown in inflation for granted. While the Fed’s preferred inflation measure has cooled to 3.4 percent from above 7 percent last year, squeezing price increases back to the central bank’s 2 percent goal could still prove to be a bumpy process. Much of the added inflation that remains is coming from stubborn service prices.“We know that ongoing progress toward our 2 percent goal is not assured: Inflation has given us a few head fakes,” Mr. Powell said. “If it becomes appropriate to tighten policy further, we will not hesitate to do so.”But the Fed does not want to raise interest rates blindly. It takes time for monetary policy changes to have their full effect on the economy, so the Fed could crimp the economy more painfully than it wants to if it raises rates quickly and without trying to calibrate the moves.While central bankers want to cool the economy to bring down inflation, they would like to avoid causing a recession in the process.“We will continue to move carefully,” Mr. Powell said. He said that would allow officials “to address both the risk of being misled by a few good months of data and the risk of over-tightening.”The risk of overdoing it is why central bankers are contemplating whether they need to make another move, or whether inflation is on a steady path back to normal.As of their September economic projections, officials thought that one final rate increase might be necessary, investors doubt that they will raise rates again in the coming months. In fact, market pricing suggests that the Fed could start cutting interest rates as soon as the middle of next year.Markets are betting there is only a sliver of a chance that the Fed will adjust policy at its final meeting of 2023, which will conclude on Dec. 13, and Mr. Powell did little to signal that a rate increase is imminent.Still, his remarks pushed back on the growing conviction among investors that the central bank is decisively finished.“We still believe the Fed is done hiking for this cycle, but today’s speech should serve as notice that their rhetoric must stay hawkish until they’ve seen further improvement in inflation,” Michael Feroli, chief U.S. economist at J.P. Morgan, wrote in a research note.Some economists have been anticipating that a recent jump in longer-term interest rates might persuade the Fed to hold off on raising borrowing costs again. While the Fed sets shorter-term interest rates, longer-term ones are based on market movements and can take time to adjust — but when they do, mortgages, business loans and other types of borrowing become more expensive.Fed officials are watching market moves, including whether they last and what is causing them, Mr. Powell acknowledged. He said officials would watch how the moves shaped up.“We’re moving carefully now, we’ve moved very fast, and rates are now restrictive,” Mr. Powell said. “It’s not something we’re trying to make a decision on right now.”He also used his speech to discuss some longer-term issues in monetary policy, including whether interest rates, which had lingered near rock-bottom levels for much of the decade preceding the pandemic, will eventually return to a much lower setting.Some economists have speculated that borrowing costs might remain permanently higher than they were in the years after the deep 2007-9 recession. But Mr. Powell said that it was too early to know, and that Fed researchers would ponder the question as part of their next long-run policy review.“We will begin our next five-year review in the latter half of 2024 and announce the results about a year later,” Mr. Powell explained.The last review concluded in 2020 and was focused on how to set policy in a low-interest rate world, a backdrop that quickly changed with the advent of rapid inflation in 2021. More