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A change to this one clause could be the most important part of the Fed meeting

2024-01-31 09:59:43       source:CNBC

Janurary 30, 2024

Immediately after the Federal Reserve wraps up its meeting this week, all eyes are likely to gravitate to one small piece of wording that could unlock the future of monetary policy.

In its post-meeting statement, the central bank is expected give an important hint about interest rate moves to come by removing a clause from previous statements that reads: “In determining the extent of any additional policy firming that may be appropriate to return inflation to 2 percent over time,” followed by an outlining of conditions it assesses.

For the past year-plus, the wording has underlined the Fed’s willingness to keep raising interest rates until it reaches its inflation goal. Remove that clause and it opens the door to potential rate cuts ahead; keep it and policymakers will be sending a signal that they’re not sure what’s to come.

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