Higher US Interest Rates for Longer

Higher rates for longer are the theme from the FOMC rate meeting, which has seen the Federal Reserve raise the benchmark interest rate by a further 50 basis points to mark the highest level in 15 years.

Despite recent inflation data indicating a positive reduction in overall price increases, the FED maintained its aggressive stance. Further indicating that future rate reductions may materialize in 2024 if the FOMC Dot-Plot is anything to go by. With the annual US CPI November inflation figure coming in at 7.1% against a 7.3% consensus, the FED is hesitant to ease rate hikes, stating that “it will take substantially more evidence to have confidence that inflation is on a sustained downward path.”

US inflation rose to its highest level in over 40 years in 2022, indicating a much-needed tight monetary policy stance to curb a continued rise. In effort to tame rising price levels, the FED raised its benchmark interest rate by half a point at the December meeting, following four successive three-quarter rate hikes in prior meetings. With inflation being as sticky and difficult to curb, future rate hikes appear more likely than not.

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