Noting that it’s far too soon to declare victory against inflation, the U.S. Federal Reserve also signaled Dec. 13 that its attention has turned from interest rate hikes to potential rate cuts in 2024.

In issuing its latest Federal Open Market Committee statement, the nation’s central bank said it opted to hold its current interest rate at 5.25-5.5% — a 22-year high — as it continues to assess information and its implications for monetary policy. The Fed aims to move inflation from its current 3.14% to its longstanding goal of 2%.

At a press conference following the FOMC meeting, Fed Chairman Jerome Powell suggested that the Fed’s most recent interest rate this past July could be the last needed to tamper inflation, which is at almost one-third of what it was at its Summer 2022 peak of 9.06%. 

That rate fell to 6.45% by this past December, 4.93% in April and as low as 2.97% in June before a modest rise in July (3.18%), August (3.67%) and September (3.70%), but has since fallen.

With inflation slowing faster than expected, Powell acknowledged the downside of leaving rates too high.

“We’re aware of the risk that we would hang on too long,” he said in the press conference. “We’re very focused on not making that mistake.”

Asked if the Fed is eyeing rate cuts, Powell added, “There’s a general expectation that this will be a topic for us, looking ahead. That’s really what happened in today’s meeting.”

The Fed’s FOMC Projections materials showed that the committee anticipates three rate cuts in 2024, and the expectation that 2023’s fourth quarter “core inflation” — which excludes volatile indexes for food and energy items —will rise 3.2% year-over-year, which is down from the 3.7% projected this past September. The group expects core inflation to fall to 2.4% at the end of 2024, also down from September’s projection of 2.6%.

Federal data showed that November consumer inflation edged up but at a continued decelerating pace that was in line with expectations, while wholesale inflation likewise trended closer to breakeven.

“I welcome the progress,” Powell said of the latest figures. “We just need to see more.”