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<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="820" height="461" src="https://cms.cnbcafrica.com/wp-content/uploads/2022/06/GettyImages-1209645576-1-820x461.jpg" alt="" class="wp-image-417984" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2022/06/GettyImages-1209645576-1-820x461.jpg 820w, https://cms.cnbcafrica.com/wp-content/uploads/2022/06/GettyImages-1209645576-1-300x169.jpg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2022/06/GettyImages-1209645576-1-160x90.jpg 160w, https://cms.cnbcafrica.com/wp-content/uploads/2022/06/GettyImages-1209645576-1-768x432.jpg 768w, https://cms.cnbcafrica.com/wp-content/uploads/2022/06/GettyImages-1209645576-1-1536x864.jpg 1536w, https://cms.cnbcafrica.com/wp-content/uploads/2022/06/GettyImages-1209645576-1-scaled.jpg 2048w" sizes="auto, (max-width: 820px) 100vw, 820px" /><figcaption class="wp-element-caption">The Maersk Line freighter stands at sunset in the Mediterranean port of Limassol. Cyprus, Friday, April 10, 2020. Global shipping giant Maersk has suspended its 2020 full-year guidance on earnings citing the severe impact of COVID-19 on international transport market and supply chains. (Photo by Danil Shamkin/NurPhoto via Getty Images)</figcaption></figure>



Danish shipping giant&nbsp;<a href="https://www.cnbc.com/quotes/DP4H-FF/">Maersk</a>&nbsp;confirmed on Tuesday that its vessels due to transit the Red Sea and Gulf of Aden would take the Cape of Good Hope route around the south of Africa after a&nbsp;<a href="https://www.cnbc.com/2023/12/18/how-houthi-attacks-in-red-sea-threaten-global-supply-chain.html">spate of attacks</a>&nbsp;by Houthi militants from Yemen.



Along with a host of other firms, the company had previously announced a temporary pause on all travel through the passages. The Gulf of Aden runs along the southern coast of Yemen, while the Red Sea provides a key link between Asia and Europe via Egypt’s Suez Canal.



Germany’s&nbsp;<a href="https://www.cnbc.com/quotes/HLAG-DE/">Hapag-Lloyd</a>&nbsp;on Monday announced its vessels would take the lengthier Cape of Good Hope route between the continents, citing an “unacceptable” safety risk after an attack on its ship, the Al Jasrah, in the Red Sea.



Around 30% of global container trade passes through the Suez Canal.



“The attacks we have seen on commercial vessels in the area are alarming and pose a significant threat to the safety and security of seafarers,” Maersk said in a statement provided to CNBC.



At least two ships were targeted with projectiles on Monday, according to official reports. Houthi leaders say they are pursuing Israel and all Israel-bound vessels as a result of the&nbsp;<a href="https://www.cnbc.com/2023/12/18/israel-launches-fresh-strikes-on-gaza-as-un-nears-vote-on-aid.html">war in the Gaza Strip</a>.



Maersk said that, after monitoring the situation since suspending the routes on Friday, it had decided all vessels currently on hold and previously scheduled to travel via the Red Sea would take the Cape of Good Hope.



The vessels will continue on diverted routes “as soon as operationally feasible,” the company added. As of Monday, Maersk said it had around 20 vessels stopped en route, around half of which are east of the Gulf of Aden. The remainder are located south of the Suez Canal in the Red Sea, or north of it in the Mediterranean Sea.



Decisions on future journeys will be made on a case-by-case basis, Maersk said, and could include diversions or “further contingency measures.”



The Cape of Good Hope route reduces an Asia-Europe trip’s effective capacity by 25%, according to analysts at UBS.



Market-watchers say the situation is likely to put pressure on&nbsp;<a href="https://www.cnbc.com/2023/12/18/how-houthi-attacks-in-red-sea-threaten-global-supply-chain.html">global supply chains</a>&nbsp;and drive up freight rates, as additional time for ships to reach their destination takes capacity out of the market.



But the shipping industry is currently in a state of oversupply following pandemic tightness, potentially easing overall supply chain disruption.



Some firms, including oil major&nbsp;<a href="https://www.cnbc.com/quotes/">BP</a>, have so far only&nbsp;<a href="https://www.cnbc.com/2023/12/18/global-supply-chains-face-another-major-hit-as-ships-avoid-suez-canal.html">confirmed</a>&nbsp;that Red Sea travel is on pause. BP declined to comment on potential reroutings when contacted by CNBC on Tuesday.



Amid the Red Sea turmoil, U.S. Defense Secretary Lloyd Austin on Monday <a href="https://www.cnbc.com/2023/12/18/us-to-expand-red-sea-defense-as-houthis-disrupt-trade.html">announced the formation of an international taskforce</a>, including the United Kingdom, Bahrain, Canada, France, Italy, the Netherlands, Norway, Seychelles and Spain, to “jointly address security challenges” in the region.



Details were not provided on what the countries have committed to or may provide. U.K. Defense Secretary Grant Shapps&nbsp;<a href="https://www.gov.uk/government/news/hms-diamond-joins-new-international-task-force-to-protect-shipping-in-the-red-sea" target="_blank" rel="noreferrer noopener">said Tuesday</a>&nbsp;that the Royal Navy’s HMS Diamond, an air-defence guided missile destroyer, would join the task force.



The Italian defense ministry meanwhile said the Italian navy would send one of its frigates to help protect the route, Reuters reported.



The U.S. has already provided support in the region, shooting down&nbsp;<a href="https://www.cnbc.com/2023/12/16/us-and-britain-say-their-navies-shot-down-15-attack-drones-over-the-red-sea.html">dozens</a>&nbsp;of Houthi drones targeting commercial ships.



Maersk said that it was “pleased to see global governments reacting promptly with joint efforts on international maritime security and capacity building in the area,” but that it remained difficult to determine when a return on the route would be possible for its vessels.

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<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="820" height="461" src="https://cms.cnbcafrica.com/wp-content/uploads/2023/12/107235681-1683214886781-gettyimages-1252628483-US-WASHINGTON_DC-FED-INTEREST_RATES-HIKE-820x461.jpeg" alt="" class="wp-image-436114" srcset="https://cms.cnbcafrica.com/wp-content/uploads/2023/12/107235681-1683214886781-gettyimages-1252628483-US-WASHINGTON_DC-FED-INTEREST_RATES-HIKE-820x461.jpeg 820w, https://cms.cnbcafrica.com/wp-content/uploads/2023/12/107235681-1683214886781-gettyimages-1252628483-US-WASHINGTON_DC-FED-INTEREST_RATES-HIKE-300x169.jpeg 300w, https://cms.cnbcafrica.com/wp-content/uploads/2023/12/107235681-1683214886781-gettyimages-1252628483-US-WASHINGTON_DC-FED-INTEREST_RATES-HIKE-160x90.jpeg 160w, https://cms.cnbcafrica.com/wp-content/uploads/2023/12/107235681-1683214886781-gettyimages-1252628483-US-WASHINGTON_DC-FED-INTEREST_RATES-HIKE-768x432.jpeg 768w, https://cms.cnbcafrica.com/wp-content/uploads/2023/12/107235681-1683214886781-gettyimages-1252628483-US-WASHINGTON_DC-FED-INTEREST_RATES-HIKE-1536x864.jpeg 1536w, https://cms.cnbcafrica.com/wp-content/uploads/2023/12/107235681-1683214886781-gettyimages-1252628483-US-WASHINGTON_DC-FED-INTEREST_RATES-HIKE.jpeg 1600w" sizes="auto, (max-width: 820px) 100vw, 820px" /><figcaption class="wp-element-caption">Photo: via CNBC</figcaption></figure>



The Federal Reserve on Wednesday held its key interest rate steady for the third straight time and set the table for multiple cuts to come in 2024 and beyond.



With the inflation rate easing and the economy holding in, policymakers on the Federal Open Market Committee voted unanimously to keep the benchmark overnight borrowing rate in a targeted range between 5.25%-5.5%.&nbsp;



Along with the decision to stay on hold, committee members penciled in at least three rate cuts in 2024, assuming quarter percentage point increments. That’s less than market pricing of four, but more aggressive than what officials had previously indicated. 



Markets had widely anticipated the decision to stay put, which could end a cycle that has seen 11 hikes, pushing the fed funds rate to its highest level in more than 22 years. There was uncertainty, though, about how ambitious the FOMC might be regarding policy easing. Following the release of the decision, the Dow Jones Industrial Average jumped more than 400 points, surpassing 37,000 for the first time.



The committee’s “dot plot” of individual members’ expectations indicates another four cuts in 2025, or a full percentage point. Three more reductions in 2026 would take the fed funds rate down to between 2%-2.25%, close to the long-run outlook, though there was considerable dispersion in the estimates for the final two years. 



Markets, though, followed up the meeting and Chair Jerome Powell’s press conference by pricing in an even more aggressive rate-cut path, anticipating 1.5 percentage points in reductions next year, double the FOMC’s indicated pace.



In a possible nod that hikes are over, the statement said that the committee would take multiple factors into account for “any” more policy tightening, a word that had not appeared previously. 



“While the weather is still cold outside, the Fed has suggested a potential thawing of frozen high interest rates over the next few months,” said Rick Rieder, chief investment officer of global fixed income at asset management giant BlackRock.



Along with the interest rate hikes, the Fed has been allowing up to $95 billion a month in proceeds from maturing bonds to roll off its balance sheet. That process has continued, and there has been no indication the Fed is willing to curtail that portion of policy tightening.&nbsp;



<h2 class="wp-block-heading" id="h-inflation-eased-over-the-past-year"><a></a>Inflation ‘eased over the past year’</h2>



The developments come amid a brightening picture for inflation that had spiked to a 40-year high in mid-2022.&nbsp;



“Inflation has eased from its highs, and this has come without a significant increase in unemployment. That’s very good news,” Chair Jerome Powell said during a news conference.



That echoed new language in the post-meeting statement. The committee added the qualifier that inflation has “eased over the past year” while maintaining its description of prices as “elevated.”&nbsp;Fed officials see core inflation falling to 3.2% in 2023 and 2.4% in 2024, then to 2.2% in 2025. Finally, it gets back to the 2% target in 2026.



Economic data released this week showed both consumer and wholesale prices were little changed in November. By some measures, though, the Fed is nearing its 2% inflation target. Bank of America’s calculations indicate that the Fed’s preferred inflation gauge will be around 3.1% year over year in November, and actually could hit a 2% six-month annualized rate, meeting the central bank’s goal. 



The statement also noted that the economy “has slowed,” after saying in November that activity had “expanded at a strong pace.”&nbsp;



In the news conference, Powell said: “Recent indicators suggest that growth in economic activity has slowed substantially from the outsized pace seen in the third quarter. Even so, GDP is on track to expand around 2.5% for the year as a whole.”



Committee members upgraded gross domestic product to grow at a 2.6% annualized pace in 2023, a half percentage point increase from the last update in September. Officials see GDP at 1.4% in 2024, roughly unchanged from the previous outlook. Projections for the unemployment rate were largely unchanged, at 3.8% in 2023 and rising to 4.1% in subsequent years. &nbsp;



Officials have stressed their willingness to hike rates again if inflation flares up. However, most have said they can be patient now as they watch the impact the previous policy tightening moves are having on the U.S. economy. &nbsp;



Stubbornly high prices have exacted a political toll on President Joe Biden, whose approval rating has suffered in large part because of negative sentiment on how he has handled the economy. There had been some speculation that the Fed could be reluctant to make any dramatic policy actions during a presidential election year, which looms large in 2024. 



However, with real rates, or the difference between the fed funds rate and inflation, running high, the Fed would be more likely to act if the inflation data continues to cooperate.

107235681-1683214886781-gettyimages-1252628483-US-WASHINGTON_DC-FED-INTEREST_RATES-HIKE

Fed holds rates steady, indicates three cuts coming in 2024

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Where is tech headed in 2024?

Why the golden age of remote work may be coming to an end #Shorts

How are Houti Red Sea attacks impacting the global economy?

Apple Executives Johny Srouji And John Ternus Talk About Chips, AI And Innovation

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Global rice markets are in crisis amid ‘artificial’ shortage #Shorts

How Budget Airlines Like Ryanair Make Money

How the American Red Cross makes and spends its billions

Shipping giant Maersk begins rerouting ships due to Red Sea turmoil

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Who Will Be AI’s Winners And Losers | The Bottom Line

Why The Port Of Baltimore Is Getting A Makeover

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Where is tech headed in 2024?

Why the golden age of remote work may be coming to an end #Shorts

How are Houti Red Sea attacks impacting the global economy?

Apple Executives Johny Srouji And John Ternus Talk About Chips, AI And Innovation

Why CEOs Are Quitting In Record Numbers In 2023

Global rice markets are in crisis amid ‘artificial’ shortage #Shorts

How Budget Airlines Like Ryanair Make Money

How the American Red Cross makes and spends its billions

Shipping giant Maersk begins rerouting ships due to Red Sea turmoil

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Who Will Be AI’s Winners And Losers | The Bottom Line

Why The Port Of Baltimore Is Getting A Makeover

Why Cars Lose Their Value So Fast

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Fed holds rates steady, indicates three cuts coming in 2024

Why The Airbus A380 Is Making An Unlikely Comeback

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