The Federal Reserve chose not to change its policy interest rate at its final meeting of 2023 on Wednesday, which was widely expected by market participants. Federal Reserve Chair Jerome Powell acknowledged that the current interest rate is “likely at or near the highest point of this tightening cycle.” Powell also stated that the Fed’s restrictive monetary policy stance is putting pressure on economic activity and inflation. According to the latest Summary of Economic Projections, Fed officials have increased their GDP growth estimates for this year but anticipate a slowdown in 2024, with a median forecast of 1.4% growth. Powell mentioned that participants have lowered their outlook on interest rates, with projections of a 4.6% federal funds rate by the end of 2024, 3.6% by the end of 2025, and 2.9% by the end of 2026. This signals an expected 75 basis points reduction in rates for 2024. The updated projections for the Fed’s rate path were more dovish than many had predicted. Powell also discussed the possibility of rate cuts, suggesting that it is now a topic of discussion. While he praised recent economic indicators, he emphasized the gradual process of reducing inflation and the potential need to tighten policy if necessary. The market has reacted by increasing bets on a rate cut by March 2023, with a 70% probability assigned. Gold prices rallied in response, along with U.S. 20+ Year Treasuries, and stocks reached all-time highs.