In its post-meeting media conference, the Federal Reserve announced it would again hold interest rates steady and revealed plans to cut rates three times in 2024.
Chair Jerome Powell also signaled that the Federal Reserve’s tactic of raising interest rates to combat inflation was unlikely to continue. In 2022, the Fed began implementing rate hikes in an effort to slow economic growth and lower prices of goods and services, expecting to see unemployment rise as a result.
However, even as the pace at which inflation and the economy have grown has indeed stagnated in 2023, the U.S. continued to see jobs rise, surprising analysts and government authorities alike. “Inflation keeps coming down, the labor market keeps getting back into balance and, it’s so far, so good,” remarked Powell during yesterday’s meeting with the press.
The general optimism expressed by the Federal Reserve chief is a marked change from previous statements. Although the central bank has now left interest rates unchanged three times in a row, Powell has until now refused to hint at a possible end to disinflationary measures, commenting just two weeks ago, “It would be premature to conclude with confidence” that rates were high enough to impede the growth of inflation.
The news of possible rate cuts next year is especially encouraging for small businesses. Higher interest rates have made it even more difficult for entrepreneurs to access capital, forcing many to offset loan costs by slowing their company’s growth.
Although the Federal Reserve expects each cut to make only three quarter-point adjustments for now, with the goal of bringing the final rate to 4.6% by the end of 2024, such a reduction would still be immensely helpful for startups and could spur job and economic growth even more.
In November, small business owners continued to show pessimistic attitudes toward the economy and their prospects, according to the National Federation of Independent Business, with many citing inflation as a key concern. Should conditions continue to improve and the Federal Reserve’s plans remain in place, it may give entrepreneurs the confidence boost needed to invest in new projects, raise pay, and scale their organizations.
