Fed Cautious on Cutting Interest Rates

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Fed policymakers judged that the policy rate was likely at its peak for this tightening cycle, but generally noted that they did not expect it would be appropriate to reduce it until they had gained greater confidence that inflation was moving sustainably toward 2%, minutes from the January FOMC meeting showed. Also, participants highlighted the uncertainty associated with how long a restrictive monetary policy stance would need to be maintained. Only two policymakers highlighted the potential drawbacks of maintaining a restrictive stance for an extended period, while others noted the risks of moving too quickly. Meanwhile, the Fed reinforced the future path of the policy rate would depend on incoming data, the evolving outlook, and the balance of risks. The Federal Reserve kept the fed funds rate unchanged at a 23-year high of 5.25%-5.5% for a fourth consecutive meeting in January 2024, in line with expectations.

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