Watch the Annual Market Review 2023 video.  In this year’s recap: The year 2023 was dominated by inflation and the Federal Reserve's restrictive policy in response to it.  The year began with inflation at about 6.5%, with the Fed raising interest rates despite fears of rising unemployment and an economic recession.  But while the focus remained on inflation, several other events occurred during the year, including the a political battle over the debt ceiling and a potential government shutdown; the collapse of several banks; labor strikes; and unrest in the Middle East.

In March 2022, the Federal Reserve began to aggressively raise interest rates as part of a restrictive policy aimed at reining in escalating inflation. In 2023, there were signs that the Fed's monetary policy was paying off. Price growth slowed, apparently without triggering a recession.

The personal consumption expenditures price index was 5.4% in January, while core prices, excluding food and energy, were 4.7%.  Other than a moderate surge during the summer, the PCE price index trended lower, with the last reading at 2.6% (core prices were 3.2%) for the 12 months ended in November.

While inflation has turned lower, it remained above the Fed's 2.0% target. However, the progress in moderating price pressures allowed the Fed to refrain from further interest rate hikes since July.  In addition, recent Fed projections indicate rate cuts of 75.0 basis points in 2024, possibly in the form of three 25.0-basis point rate reductions, although changes in the economy or inflation could prompt the Fed to alter its course of action moving forward.