Find out whether the central bank chose to cut rates
The Federal Reserve has held interest rates steady once more following its latest meeting, continuing with a patient approach amid growing speculation that rate cuts are on the way.
The central bank said on Wednesday afternoon that it was keeping its funds rate at its current level of 5.25% to 5.5%, meaning it remains at a 23-year high but has not changed for five consecutive announcements.
The decision comes just over a week after it was revealed that inflation increased to a pace of 3.2% in February, a development that seemed to nix any chance that the Fed would introduce a rate cut in today’s announcement.
In its accompanying statement, the Fed noted that inflation had eased over the past year, “but remains elevated” while economic activity has also expanded at a solid pace and job gains have continued strongly.
“The Committee does not expect it will be appropriate to reduce the target range until it has gained greater confidence that inflation is moving sustainably toward 2%,” it added.
Markets have pushed back their timeline for rates to start falling, with the fed funds futures market having anticipated a March cut at the beginning of the year but now expecting rate drops by June at the earliest.
Expectations have also risen that the Fed will introduce a milder series of cuts than first envisaged, with markets adjusting predictions from six or seven drops to three this year.
First American deputy chief economist Odeta Kushi indicated prior to the announcement that stickier-than-expected inflation had likely kept the Fed on a more cautious path than it might otherwise have taken.
“A lot has changed since the Fed’s last set of projections in December,” Kushi said. “Investors were bullish late last year on when and how much the Federal Reserve would cut rates in 2024.
Since then, however, there have been several data releases indicating that inflation is continuing to run hotter than many anticipated it would by this time of the year.”
The Fed is next scheduled to meet on interest rates between April 30 and May 1, with five further meetings to take place before the end of the year.
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