The US Federal Reserve held interest rates steady on Wednesday, but policymakers indicated they still expect to reduce them by three-quarters of a percentage point by the end of 2024 despite stodgier expected progress towards the central bank’s 2% inflation target.
The Fed’s new policy statement described inflation as remaining “elevated”, and updated quarterly economic projections showed the personal consumption expenditures price index excluding food and energy rising at a 2.6% rate by the end of the year, compared to 2.4% in the projections issued in Dec.
Nine of the Fed’s 19 policymakers see three quarter-point rate cuts this year, and nine see two or less.
Only one pencilled in more cuts than the median, compared with five in Dec.
The new projections suggest policymakers are more inclined to keep rates higher for longer to make sure inflation does not stall out above their 2% goal, or flare up again. The current policy rate target range, reaffirmed on Wednesday, is 5.25-5.5%.
With several more readings on inflation and the job market due before the Fed’s June meeting, plenty could change. Softer inflation readings could firm up expectations for the start of rate cuts by then. Stronger ones could push them further into the future.
But at least so far, hotter-than-expected price pressures since the start of the year seem to have begun to erode US central bankers’ confidence in inflation’s progress toward the 2% goal.
The S& turned marginally higher after the Fed meeting’s outcome was announced.
