Claiming the Number Two spot on Yahoo Finance's top 10 stories of 2023 is the Federal Reserve's relentless fight against soaring inflation, the central bank's most aggressive interest rate hiking campaign since the 1980s.

As 2023 unfolded, the Fed eased up on interest rate increases amid consistent signs of economic cooling. However, recession and "soft landing" debates persist. Now, Fed Chair Jerome Powell announced a rate pause for the third straight month, opening the door to potential rate cuts resuming in 2024.

Yahoo Finance's Fed Reporter Jennifer Schonberger analyzes the Fed's monetary policy rollercoaster ride through 2023.

For more expert insight and the latest market action, click here to watch this full episode of Yahoo Finance Live.

Video Transcript

- We're counting down the top 10 stories of 2023 here at Yahoo Finance. And coming in at number two is the Fed.

JEROME POWELL: For the past year, we've taken forceful actions to tighten the stance of monetary policy.

ELIZABETH WARREN: Do you know how many people who are currently working going about their lives will lose their jobs?

- I don't have that number in front of me.

ELIZABETH WARREN: It's in your report and that would be about 2 million people.

CALLIE COX: The Fed never promises anything.

CATHIE WOOD: The Fed probably has overdone it.

JEANNA SMIALEK: The Fed is feeling really good about the fact that inflation is coming down.

CLAUDIA SAHM: We are leaving 2023 in a much better place than most commentators and probably even the Fed thought we would.

- The Federal Reserve had a lot of battles to fight this year from stubborn inflation, to questioning economists and angry legislators. Here to break down the ups and downs for the FOMC and its chair, Jerome Powell, is Yahoo Finance's Fed reporter, Jennifer Schonberger. Hey, Jen.

JENNIFER SCHONBERGER: Hey, Brad. What a difference a year makes for the Fed. The central bank began 2023, slowing the pace of its most aggressive rate hiking campaign to cool inflation since the 1980s. Now, as 2023 comes to an end, that campaign appears to be all but over.

The Fed last raised rates in July to a 22 year high. But after holding rates steady for their third consecutive meeting this month, Fed officials predicted they would likely cut rates three times in 2024. The reason? Inflation is falling closer and closer to the Fed's target of 2%. Even Fed Chair, Jay Powell, after months of sounding hawkish, turned slightly dovish at his last press conference of the year. Take a listen.

JAY POWELL: You see that people are not writing down rate hikes, that's us thinking that we have done enough, but not feeling that really strongly confidently, and not wanting to take the possibility of a rate hike off the table. Nonetheless, it's not the base case anymore.

JENNIFER SCHONBERGER: This pivot was months in the making Fed officials warn for much of the second half of the year that they would need to see further progress than inflation was coming down before they could stop raising rates. Powell himself offered several warnings.

JAY POWELL: At last year's Jackson Hole symposium, I delivered a brief direct message. My remarks this year will be a bit longer, but the message is the same. It is the Fed's job to bring inflation down to our 2% goal, and we will do so.

JENNIFER SCHONBERGER: Another Warning came in September.

JAY POWELL: Given how far we have come, we are in a position to proceed carefully as we assess the incoming data and the evolving outlook and risks.

JENNIFER SCHONBERGER: And yet a third came on the first of this month.

JAY POWELL: It would be premature to conclude with confidence that we have achieved a sufficiently restrictive stance or to speculate on when policy might ease.

JENNIFER SCHONBERGER: The shift that happened this week took many by surprise. It comes after several data points show inflation continues to drop slowly. Powell said at his press conference this week that rate cuts will be a topic of discussion looking ahead.