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Federal Reserve <br />Source: Federal Reserve Source: Bloomberg <br />0 <br />1,000,000 <br />2,000,000 <br />3,000,000 <br />4,000,000 <br />5,000,000 <br />6,000,000 <br />7,000,000 <br />8,000,000 <br />9,000,000 <br />10,000,000 <br />Federal Reserve Balance Sheet Assets <br />Recession <br />In$ millionsAs expected at the December meeting, the Federal Open Market Committee voted unanimously to leave the federal funds rate unchanged <br />at a target range of 5.25-5.50%. The Fed acknowledged inflation eased over the past year while remaining elevated. Fed Chair Powell <br />signaled that the federal funds rate is likely at or near its peak. The Summary of Economic Projections reflected Core PCE inflation <br />reaching the target 2% level in 2026 without a significant increase in unemployment. The median forecast for the federal funds rate <br />declined to 4.6%, implying three quarter-point cuts next year, four in 2025 and three in 2026, placing the federal funds target rate around <br />2.9% at the end of the forecast horizon. The market interpreted the statement as dovish, with futures contracts pricing in rate cuts sooner <br />and more aggressively than the Fed’s forecasts next year. We believe the FOMC will loosen monetary policy in mid-2024 as inflation and <br />economic growth continue to moderate. Since the Fed began its Quantitative Tightening campaign in June 2022, securities holdings have <br />declined by over $1.2T to approximately $7.8T. <br />0.00% <br />1.00% <br />2.00% <br />3.00% <br />4.00% <br />5.00% <br />6.00% <br />Effective Federal Funds Rate <br />Recession <br />Yield (%)6