Fed minutes show interest rates near 'peak' level

By Ovunc Kutlu

ISTANBUL (AA) - US Federal Reserve members believe interest rates are near their "peak," according to minutes of a central bank's meeting released Wednesday.

"In discussing the policy outlook, participants viewed the policy rate as likely at or near its peak for this tightening cycle, though they noted that the actual policy path will depend on how the economy evolves," according to the minutes from the Fed's latest meeting on Dec. 12 - 13.

"The average path for the policy rate implied by market pricing shifted down considerably over the period," it added.

The Fed skipped a rate hike for the fourth time in 2023 on Dec. 13, keeping the federal funds rate unchanged between the 5.25% - 5.5% target range -- still the highest in 22 years.

The central bank made 11 interest rate increases from March 2022 through July 2023 to fight record inflation that climbed during the summer of 2022 to its highest in more than four decades.

"Consumer price inflation had eased over the past year but remained elevated," said the minutes. "Labor demand and supply continued to move gradually into better alignment."

"The price index for total personal consumption expenditures (PCE) increased 3.0 percent over the 12 months ending in October, while core PCE inflation—which excludes changes in energy prices and many consumer food prices—was 3.5 percent over the same period; both total and core," it added.

Annual consumer inflation in the US came in at 3.1% in November, slowing from a 3.2% gain in October, according to Labor Department figures.

The figures for December will be released Jan. 11.

The Fed's projections materials released Dec. 13 indicated that the bank could make at least three interest rate cuts of 25 basis points each in 2024, another four rate cuts during 2025 and three in 2026.

"In their submitted projections, almost all participants indicated that, reflecting the improvements in their inflation outlooks, their baseline projections implied that a lower target range for the federal funds rate would be appropriate by the end of 2024," said the minutes.

The Fed participants in the meeting, however, noted that their outlooks "were associated with an unusually elevated degree of uncertainty.”