🔐 Federal Reserve Holds Steady on Interest Rates Amid Inflation Concerns 🏡
The Federal Reserve decided to keep its key interest rate unchanged on Wednesday 📅, scaling back its forecast from three rate cuts to just one this year after an inflation pickup in early 2024 📈.
While markets had hoped for two rate cuts following an encouraging inflation report 📉, the Fed’s outlook is likely to disappoint. In a statement after their two-day meeting, the central bank acknowledged modest progress toward their 2% inflation objective 🎯.”
In recent months, there has been modest further progress toward the (Fed’s) 2 percent inflation objective,” the Fed said. However, they reiterated that they “do not expect it will be appropriate to reduce the target range until it has gained greater confidence that inflation (now running about 3% to 3.5%) is moving sustainably toward” their 2% goal.
Fed Chair Jerome Powell stated, “We want to see more good data to bolster our confidence that inflation is moving sustainably toward 2%.” 📊
📉 Is Inflation Increasing or Decreasing Right Now? 🌡️
The inflation report on Wednesday came in cooler than expected, suggesting a gradual moderation after price increases accelerated in the first quarter. Overall inflation was flat in May, and the core price measure rose 0.2%, nudging down the annual increase to 3.4% from 3.6% the previous month.
“We see today’s report as progress and building confidence,” Powell said. “This is a step in the right direction, but it really is only one reading.” 👣
✂️ How Many Rate Cuts Are Expected in 2024? 📉
Officials now estimate they’ll lower the federal funds rate by a quarter of a percentage point to a range of 5% to 5.25% by year’s end, equivalent to one quarter point cut. 📉 This is fewer than the three decreases they projected in March.
Most economists expected the first cut in September, but policymakers are divided, with some predicting two cuts, some foreseeing one, and others looking for none. The median could change depending on how inflation evolves in the coming months. 🔮
🕰️ Looking Ahead: More Rate Cuts on the Horizon? 🕰️
Officials expect four rate cuts next year and another four in 2026, more than they previously anticipated. This blueprint would lower the key rate to 3.1% by the end of 2026, in line with their March estimate.
Rate cuts lower borrowing costs for consumers 💰, stimulating the economy and juicing the stock market. 📈 As inflation remains high and the economy and job market perform solidly, the Fed can be cautious in weighing lower rates. 🚨
Written by the Dowell Family Team of ReeceNichols
