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12/06/24
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Fed Keeps Rates Unchanged But Expects Only One Cut In 2024
On Wednesday, the Federal Reserve kept interest rates steady, but now expects only one rate cut for 2024, as it expects inflation to trend higher than anticipated previously.
The FOMC kept its benchmark rate in a range of between 5.25% and 5.5%.
Although the decision was generally expected, Fed policymakers now believe that fewer rate cuts will be required this year.
Fed members now expect the benchmark rate to fall to 5.1% this year, indicating only one rate cut this year, versus the March estimate for three cuts. Fed members believe the rates will fall to 4.1% in 2025, up from their previous forecast of 3.9%, before eventually dropping to 3.1% in 2026.
In an indication that members are concerned about whether policy would be restrictive in the long term, the Fed increased its forecast on the neutral rate, one that neither restricts nor stimulates economic growth, from 2.6% previously to 2.8%.
The expectation of fewer rate cuts for the year comes as the central bank increased its inflation forecasts.
The Fed’s preferred measure of inflation, the core personal consumption expenditures price index, is expected to be 2.8% in 2024, higher than the previous forecast of 2.6%. Inflation is estimated to be 2.3% for 2025, up from the prior 2.2%.
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