Following a two-day Federal Open Market Committee (FOMC) meeting, the US Federal Reserve announced its decision to maintain the benchmark interest rates unchanged at 5.25 per cent – 5.50 per cent for the fifth consecutive meeting. This decision aligns with market expectations, despite persistent concerns about inflation.
Despite the decision to keep rates steady, the FOMC indicated its anticipation of three rate cuts in 2024, underscoring the committee’s cautious approach to managing inflationary pressures. The committee emphasized that it would refrain from reducing the target range until it gains greater confidence in the sustainability of inflation moving towards the two per cent target.
Furthermore, FOMC members maintained the median projection for interest rates at the midpoint between 4.50 and 4.75 for the end of 2024. This suggests an expectation of 0.75 percentage points of cuts by the year’s end, potentially translating into three 0.25 percentage point cuts.
In conjunction with the rate decision, Fed policymakers revised their economic forecasts, significantly upgrading the US growth outlook for 2024 to 2.1 percent from 1.4 percent previously projected in December. While the headline inflation forecast remained unchanged, there was a slight increase in the outlook for annual “core” inflation, excluding energy and food prices, to 2.6 per cent.
Despite raising the policy rate by 5.25 percentage points since March 2022 in response to mounting price pressures, the Federal Reserve has maintained a steady policy rate since July 2023, reflecting its cautious stance towards inflation management amidst economic uncertainty.
