MONTHLY - Economic Review - Jack Kleinhenz, Ph.D., CBE

By the end of the year, inflation- adjusted gross domestic product was up a solid 2.3% year over year, and December’s unemployment rate of 3.7% was one of the lowest in decades. [...] The Fed is hopeful that its long string of interest rate hikes will help slow the pace of growth in the economy and employment enough that inflation will decline without the economy sliding into a recession, and that appears to be working. [...] Since the beginning of 2022, the Fed has increased the benchmark federal funds rate from near-zero to a range of 5.25-5.5%, a level not seen in two decades and one that many feared would trigger a recession. [...] With breathing room to consider policy choices, the Fed has signaled that it is nearing the end of elevated interest rates, leaving the rate unchanged at its most recent meeting and projecting a federal funds rate of around 4.6% by the end of 2024. [...] Likewise, consumer confidence reported by the Conference Board improved markedly in the final month of the year, with the headline index rising to 110.7, the highest level since July.