Fed leaves interest rates unchanged, signals only one '24 cut on the way
Add Axios as your preferred source to
see more of our stories on Google.
Federal Reserve chair Jerome Powell during a news conference on Wednesday. Photo: Al Drago/Bloomberg via Getty Images
The Federal Reserve kept its target interest rate unchanged and released new projections showing the central bank's leaders now expect to cut interest rates only once this year.
Why it matters: Leaders of the central bank are looking for more evidence price pressures are receding before proceeding with a much-anticipated pivot to cheaper money.
- In March, the median Fed official envisioned three interest rate cuts in 2024, but now they are expecting a considerably more cautious path involving a single rate reduction.
- Eight of 19 top Fed officials anticipated two rate cuts will be warranted by the end of 2024 and none of them now envision more than two.
Speaking to reporters at a news conference Wednesday, Fed chair Jerome Powell said that he saw either one or two rate cuts this year as "plausible" scenarios.
- "What everyone agrees on is it's going to be data dependent," Powell added.
Context: The Federal Open Market Committee left its target range for the Federal Funds rate between 5.25% and 5.5%, where it has been following seven consecutive meetings dating to last July.
- The median projection now has the target interest rate moving down to only 4.1% by the end of 2025, compared to 3.9% in March.
State of play: In the new economic projections issued alongside the policy announcements, Fed officials moved up their forecast for inflation this year. The median official now anticipated 2.6% inflation in 2024 as measured by the Fed's preferred gauge, up from 2.4% in March.
- The median of officials' forecasts for interest rates in the longer run also moved upward, to 2.8% from 2.6% in March, suggesting leaders of the central bank do not anticipate the ultra-low rates of the 2010s returning.
What they're saying: "In recent months, there has been modest further progress toward the Committee's 2% inflation objective," the FOMC statement said, adjusting language from the May meeting that instead cited "a lack of further progress" on inflation.
- Just this morning, a new report on the Consumer Price Index showed inflation slowed in May.
- "We see today's report as progress and building confidence—but we don't see ourselves as having the confidence that would warrant beginning to to loosen policy at this time," Powell said in the news conference.
- "The economy has repeatedly surprised forecasters in both directions," Powell later added. "Today was certainly a better inflation report than almost anybody expected, and we'll just have to see what the incoming data flow brings."
