What to Watch at the Fed’s Final Meeting of 2023

Federal Reserve officials will wrap up a year of aggressive inflation fighting on Wednesday afternoon, when they are expected to use their final policy decision of 2023 to leave interest rates at their highest level in 22 years.

The Fed is finishing the year on pause after the most intense campaign of interest rate increases in decades, one meant to snuff out the rapid price gains that have been bedeviling consumers since 2021.

Because inflation has now moderated substantially, central bankers have increasingly signaled that they may be done raising borrowing costs, which are set to a range of 5.25 to 5.5 percent. The question investors will be focused on Wednesday is how much rates are expected to come down in 2024 — and when those cuts might begin.

The Fed will release its statement and a fresh set of quarterly economic projections at 2 p.m., followed by a news conference with Jerome H. Powell, the Fed chair, at 2:30 p.m. Here’s what to watch.

How many cuts are projected?

Investors will closely parse the Fed’s fresh economic projections, the first they have released since September. Three months ago, officials expected to lift interest rates one more time in 2023 — something that is now seen as unlikely — before lowering them twice in 2024.

That opens up the question: Where will policymakers see interest rates at the end of next year? If they hold their projection steady at 5.1 percent, that would now imply only one rate cut. A drop to 4.9 percent would imply two rate cuts are anticipated.