Federal Reserve chairman Jerome Powell’s announcement that the federal rate will remain unchanged will have little impact on Bermuda.

This came from Joel Duffy, fixed income portfolio manager at Anchor Investment Management in Bermuda, after the Federal Open Market Committee left the fed funds rate range at 5.25 per cent to 5.50 per cent.

Mr Duffy said this move in the December meeting was widely expected by the market.

“Coming into the meeting, market expectations for rate cuts in 2024 had risen considerably over the last two months on the back of declining inflation and marginally weaker labour market data,” Mr Duffy said.

The FOMC also updated the dot plot — individual members’ projections for the path of the fed funds rate — to show a median expectation for three 0.25 per cent rate cuts next year, compared with two rate cuts in the September 2023 dot plot.

Global financial experts were calling the move “dovish” because it had few negative impacts, and supported low interest rates and expansionary monetary policy.

On Wednesday Mr Powell said inflation was still “far too high” and that victory was not assured.

At the press conference, he said he remained “squarely focused” on the Fed’s dual mandate to promote maximum employment and stable prices for the American people.

“As we approach the end of the year, it is natural to look back on the progress that has been made towards our dual mandate objectives,” he said. “Inflation has eased from its highs, and this has come without a significant increase in unemployment. That's very good news.”

In a Bloomberg Television interview, KPMG chief economist Diane Swonk said: “The Fed has shown its cards. Inflation has come down at its fastest pace since Second World War.”

Mr Powell said there was little basis for thinking that the economy is in a recession right now, but he did not rule it out for next year.

“That is always a possibility,” he said.

However, he said here was also the possibility that because of the “unusual situation” the economy could cool off in a way that enabled inflation to come down without the kind of large job losses often associated with high inflation and tightening cycles.

“So far that’s what we are seeing,” he said.

However, he said the economy had behaved in “unexpected ways” throughout the post-pandemic period.

He said people forecasted a recession for 2023, but the US had a very strong year instead.

“That was a combination of strong demand, but also real gains on the supply side,” he said. “Labour force participation picked up. Immigration picked up. The shortages and the bottlenecks from the pandemic really began to unwind. So we had significant supply side gains with strong demand.”

However, he said inflation is still too high.

“Bringing it down is not assured,” he said. “The path forward is uncertain.”

Mr Powell said they were fully committed to returning inflation to their 2 per cent goal.

“Restoring price stability is essential to achieve a sustained period of strong labour market conditions that benefit all,” he said.

Since early last year, the FOMC has significantly tightened the stance of monetary policy.

“We have raised our policy interest rate by 5¼ percentage points and have continued to reduce our securities holdings at a brisk pace,” Mr Powell said. “Our actions have moved our policy rate well into restrictive territory, meaning that tight policy is putting downward pressure on economic activity and inflation.”

The full effects of that tightening have likely not been fully felt yet, he said.