Since March 2022, the Federal Reserve raised its benchmark interest rate 11 times.
Following the Fed’s March meeting, instead of cutting the rate, officials left it where it was for the fifth straight meeting.
But they did indicate they expect to cut interest rates three times this year, despite the U.S. inflation rate staying well above the Fed’s 2% target rate. They also said they expect fewer rate cuts in 2025.
In new quarterly projections, Fed officials forecast that stronger growth and inflation above their 2% target level would persist into next year, according to an Associated Press report, suggesting interest rates would have to stay slightly higher for longer.
Chair Jerome Powell made note of the fact that inflation has cooled considerably from its peak. But, he added, “inflation is still too high, ongoing progress in bringing it down is not assured and the path forward is uncertain.”
“The risks are really two-sided here,” Powell said at a press conference following the meeting. “We’re in a situation where if we ease too much or too soon, we could see inflation come back. And if we ease too late, we could see unnecessary harm to employment.”
Stock market averages turned higher after the Fed maintained its projection of three rate cuts this year, the AP reported. Traders had feared the Fed might downgrade the number of expected rate cuts for 2024.
For 2025, though, the policymakers now foresee only three rate cuts, down from four in their December projections. And they expect “core” inflation, which excludes volatile food and energy costs, to still be 2.6% by the end of 2024, up from their previous projection of 2.4%. In January, core inflation was 2.8%, according to the Fed’s preferred measure.
Two recent government reports pointed to higher-than-expected inflation. Those reports, Powell said Wednesday, “haven’t really changed the overall story, which is that of inflation moving down gradually on a sometimes bumpy road towards 2%.”
