The Federal Reserve announced Wednesday that they are holding interest rates steady for the fourth straight time.
The Fed will likely cut rates in 2024 as inflation nears the agency's 2% target, but it's unknown when the first rate cut may happen.
This comes as fears over a possible U.S. recession are starting to fade with recent economic reports displaying strong resilience, leading the International Monetary Fund to also predict a soft landing for global growth.
"The global economy continues to display remarkable resilience with inflation declining steadily and growth holding up," declared Pierre-Olivier Gourinchas, IMF chief economist. "The chance of a soft landing has increased."
Gourinchas warned, however, that the expansion remains slow and risks remain.
"Maybe if central banks remain too tight for too long, there could be a slowdown in economic activity or if there is a tightening of financial conditions or if there is another round of supply shocks. For instance, there could be downside to the global economy," said Gourinchas. "But there can also be upside to the global economy. Inflation could be continuing to come down, back toward targets."
At the end of 2023, the U.S. economy grew higher than anticipated, while consumer spending in December also rose.
"Back in beginning of 2023, there were a preponderance of risks to the downside for economic activity and to the upside for inflation," continued Gourinchas. "We were seeing maybe inflation being very persistent, that there were a lot of concerns about the fact that the fight against inflation would potentially bring a recession. And one year later, we are in a situation where growth has held steady and inflation has been coming down, so that's certainly a very good development."
Still, some experts warn the U.S. may not yet be out of the woods with certain sectors of the economy slowing due to the Federal Reserve's interest rate increases to fight inflation.
Many financial experts predict the economy may cool a bit this quarter amid high interest rates, but believe the chances of a recession have decreased as inflation moderates.
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