Federal Reserve
In a move that wasn’t at all surprising, the Federal Open Market Committee (FOMC) decided to hold its target interest rate steady at its final policy meeting of 2023. With that question settled for the year, the question now becomes what the Fed will do in 2024.
While markets are largely expecting four rate cuts next year, there’s no telling what will actually happen. But whatever the Fed ends up doing next year will undoubtedly have a major impact on markets.
From all appearances it seems that the Fed’s rate hikes are over now. Having not raised its target interest rate in months, there doesn’t seem to be any pressing need for continued interest rate hikes.
Inflation, while still not under control, is at least not as high as it was last year, even if core inflation is still at 4%. And even though the unemployment rate is dropping, the overall employment situation isn’t indicative of an overly hot labor market.
Perhaps most importantly, Fed policymakers themselves seem to think that rate hikes are over. Of the 19 FOMC members who submitted their long-term projections as the last meeting, only 2 thought that interest rates should remain at their current level at the end of next year.
Most policymakers thought that the federal funds rate should be between 4.75-5% or 4.50-4.75% by the end of next year. Given 25 basis point cuts, that would indicate three to four rate cuts next year.
Of course, Fed policymakers are known for their lack of foresight. At the end of 2022, they had projected the federal funds rate to be 5.0-5.25% by the end of this year, a slight miss.
And at the end of 2021, they had projected the federal funds rate to be 0.75-1.00% by the end of 2023. Whoops!
That goes to show that Fed policymakers themselves don’t really know what’s going to happen to the economy, nor how they’re going to react to what’s happening.
With fears of recession growing all the time, everyone wants to know what the Fed will do in 2024. If the economy starts to slow down, as many expect it to, it seems likely that the Fed will start to cut rates at some point. But when will it start?
If the Fed starts to cut rates, it most likely would first occur after the March FOMC meeting, which is the first 2024 meeting featuring a press conference afterwards. It would be hard to imagine the Fed making a big about face without taking the time to express itself in a press conference.
But regardless of what the Fed ends up doing, there are a few potential wild cards that could throw a wrench in the works. Among them are:
The bank failures earlier this year were a wake up call for many Americans. They began to realize that the money they had just assumed was safe in their bank accounts wasn’t really.
That was a wake up call for many people, and led to a shift in asset allocation. Whether they sought to move their money into money market funds or to buy gold, Americans started to realize that they needed to protect their funds.
We’re not out of the woods yet, and a faltering economy could lead to further bank failures in 2024. If that happens, don’t be surprised to see the Fed reverse its monetary tightening, through both rate cuts and monetary injections to stabilize the banking system.
While inflation is lower today than it was last year, the Fed can’t really say that it has defeated it yet. With core inflation still at 4%, there’s a way to go before inflation reaches the Fed’s 2% target.
The big question is if the Fed can maintain monetary tightness long enough to push inflation down to 2% before rate cuts or before the economy begins to slow. If the Fed starts cutting rates or halting its monetary tightening, that could lead to a resurgence of inflation.
While the job market can’t really said to be hot, the relatively low unemployment rate has made it unlikely that the Fed will cut rates anytime soon. And even with widely announced layoffs in numerous industries, the unemployment rate continues to fall.
That could all change in 2024, however. If unemployment rises, or if manufacturing and production decline, there will be a stronger case for the Fed to start cutting interest rates.
There’s a bit of seasonality involved in the job market at this time of year, with more businesses hiring workers to get through the holiday season and then laying them off in the new year. But if the layoffs are larger than normal, or if they continue, that could indicate that the economy is slowing and could put additional pressure on the Fed to cut rates.
2023 has been a strange year, full of ups and downs. There’s no telling what 2024 will bring, although many Americans seem pessimistic about the future.
With growing indebtedness throughout the economy, many households are already struggling to make ends meet. And those that have fared better know that 2024 may have some surprises in store.
That’s why many Americans are already starting to try to get ahead of the next recession. They’re looking to protect their existing assets in the hope of minimizing their losses if the economy falls into recession next year.
One way they’re doing that is by buying precious metals like gold and silver. Gold and silver have served as safe haven assets and stores of value for centuries, and continue to be one of the first safe havens people turn to when times get tough.
With the ability to own gold and silver through a precious metals IRA, you can even protect your existing assets in tax-advantaged accounts. A tax-free rollover from an existing 401(k), 403(b), TSP, IRA, or similar account can fund a precious metals IRA, allowing you to expand your options by buying gold and silver through an IRA account.
Precious metals IRAs offer the same tax advantages as any other IRA account, allowing you to safeguard your savings with gold and silver. Or for those who want to buy gold and silver outside an IRA, there’s always the option to buy gold and silver with a direct cash purchase.
If you’re worried about the prospects for the future and want to start protecting your hard-earned money, maybe it’s time to start thinking about gold and silver. With over $2 billion in precious metals placements and over 5,000 5-star reviews, Goldco has helped thousands of people just like you benefit from owning gold and silver.
Call Goldco today to talk to one of our representatives and learn more about the many benefits of precious metals.
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