Fed Keeps Its Rate Unchanged and Points at Cutting Next Year, Likely Influencing Other Central Banks

The Federal Reserve held on Wednesday its interest rate steady, also providing its clearest signal yet that its hiking campaign is over: it forecasted a series of cuts next year.

Concretely, the Federal Open Market Committee (FOMC) kept its rate unchanged for the third meeting in a row, between the 5.25 and 5.5 percent range, still at a 22-year high. Its members' updated projections didn't include further hikes for the first time since March 2021.

In fact, they expect to cut rates by 75 basis points throughout 2024, a steeper pace than Septembers' projections. On average, expectations are that the federal funds rate will be 4.6 percent at the end of next year, but individual perspectives varied widely among FOMC members.

"The Committee will continue to assess additional information and its implications for monetary policy. In determining the extent of any additional policy firming that may be appropriate to return inflation to 2 percent over time, the Committee will take into account the cumulative tightening of monetary policy, the lags with which monetary policy affects economic activity and inflation, and economic and financial developments," reads a passage of the FOMC statement.

Fed Chair Jerome Powell maintained his messaging tone in the press conference that followed the decision, emphasizing once again that policymakers are not taking further hikes off the table if they deem them necessary. But he conceded that officials have started to discuss when it would be appropriate to start cutting rates.

"That begins to come into view and is clearly a topic of discussion out in the world and also a discussion for us at our meeting today," Powell said.

One of the regions in which that conversation started early was Latin America. After leading the world when it came to hiking, the region reaped the benefits of being among the first to start by putting itself months ahead of developed economies.

The region also took the initiative at the time of cutting rates, starting to do so months ago, but results have been uneven, with Chile slowing its pace twice already after its currency suffered one of the world's biggest drops in the prior three months.

Other countries are set to keep cutting, Brazil and Peru among them, while Mexico is expected to follow the Fed closely. It is expected that the Mexican central bank, commonly known as Banxico, will on Thursday keep its rate steady at 11.25% as it's done since March this year.