The Federal Reserve on Wednesday held interest rates steady as expected and signaled it still plans multiple cuts before the end of the year.
Following its two-day policy meeting, the central bank’s rate-setting Federal Open Market Committee said it will keep its benchmark overnight borrowing rate in a range between 5.25%-5.5%, where it has held since July 2023.
Along with the decision, Fed officials penciled in three quarter-percentage point cuts by the end of 2024, which would be the first reductions since the early days of the Covid pandemic in March 2020.
The current federal funds rate level is the highest in more than 23 years. The rate sets what banks charge each other for overnight lending but feeds through to many forms of consumer debt.
The outlook for three cuts came from the Fed’s “dot plot,” a closely watched matrix of anonymous projections from the 19 officials who comprise the FOMC. The chart provides no indication for the timing of the moves.
Chair Jerome Powell said the Fed also did not elaborate on timing but said he still expects the cuts to come, as long as the data cooperate.
“We believe that our policy rate is likely at its peak for this type of cycle, and that if the economy evolves broadly as expected, it will likely be appropriate to begin dialing back policy restraint at some point this year,” Powell said at his post-meeting news conference. “We are prepared to maintain the current target range for the federal funds rate for longer if appropriate.”
The plot indicated three cuts in 2025 – one fewer than the last time the grid was updated in December. The committee sees three more reductions in 2026 and then two more in the future until the fed funds rate settles in around 2.6%, near what policymakers estimate to be the “neutral rate” that is neither stimulative nor restrictive.
The grid is part of the Fed’s Summary of Economic Projections, which also provides estimates for gross domestic product, inflation and unemployment. The dot assortment…
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