Federal Reserve Officials Signal One Rate Cut in 2024 Amid Falling Inflation
Federal Reserve Signals One Rate Cut This Year as Inflation Eases
WASHINGTON – Federal Reserve officials announced on Wednesday that they expect to cut their benchmark interest rate just once this year, as inflation has fallen further toward their target level in recent months. The policymakers’ forecast for one rate cut was a significant decrease from a previous forecast of three, reflecting the persistent elevation of inflation despite recent cooling.
In a statement issued after its two-day meeting, the Fed highlighted that the economy is growing at a solid pace and hiring has remained strong. The officials also noted “modest further progress” toward their 2% inflation target, a more positive assessment compared to their previous meeting in May.
The Fed kept their key rate unchanged at roughly 5.3%, a level that has been maintained since July of last year. The rate cuts, if implemented, would eventually lower loan costs for consumers who have been facing high rates for mortgages, auto loans, and credit cards.
The rate-cut forecast was based on the individual estimates of 19 policymakers, with eight projecting two rate cuts, seven projecting one cut, and four envisioning no cuts at all this year. The Fed’s quarterly projections are subject to change based on evolving economic growth and inflation measures.
Recent data showed that inflation eased in May for a second consecutive month, with core prices rising just 0.2% from April and climbing 3.4% from a year earlier. While inflation has decreased from previous highs, it remains too high for the Fed’s liking, posing a challenge in balancing rate policies to combat inflation without harming economic growth.
The Fed’s decisions on rate cuts could also impact the upcoming presidential race, as voters have expressed concerns about high prices and borrowing rates. The central bank’s goal of achieving a “soft landing” by managing inflation without causing a recession has faced challenges due to unexpected inflation spikes earlier this year.
Chair Jerome Powell emphasized the need for more confidence in inflation returning to target levels before considering rate cuts, while other policymakers like Christopher Waller have called for sustained good inflation data before supporting cuts. The Fed’s future actions will be closely watched as they navigate the delicate balance between controlling inflation and supporting economic growth.