Fed sees just one rate cut in 2024 despite inflation progress
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The news: The US Federal Reserve held interest rates steady and pushed out the start of rate cuts to as late as December, with officials projecting only a single quarter-percentage-point reduction for the year.
The numbers: US consumer prices remained unchanged in May, against expectations of a 0.1% increase. For the 12 months through May, the CPI advanced 3.3% after increasing 3.4% in April, but continues to run above the Fed's 2% target.
The US central bank's new policy statement noted "modest further progress" towards its inflation target, but Fed officials projections repositioned from expecting three quarter-percentage-point reductions in March to just one now before the year end.
The context: Fed chair Jerome Powell said that combination reflected a "conservative" outlook for inflation among policymakers. Even as "more recent monthly readings have eased somewhat," that is not yet enough to instil "greater confidence" in inflation returning sustainably toward 2%, he said at a press conference following the end of the two-day policy meeting.
Recent progress has been slow, and Fed officials now project a slightly higher end-of-year inflation rate of 2.6% versus the 2.4% anticipated as of March. The Fed's statement and new Summary of Economic Projections show a central bank wrestling over how to respond to data that many read as pointing to slower inflation but also to steady growth and job creation.
The source: Reuters
