US Federal Reserve Rate Announcement

The Federal Reserve has decided to keep interest rates steady within the range of 5.25% to 5.5%, but it has revised its outlook for rate cuts to just one in 2024. Central bank policymakers highlighted “modest further progress” towards the 2% inflation objective. The Federal Open Market Committee (FOMC) adjusted its rate forecast, reducing the anticipated rate cuts for this year from three to one. This outlook may disappoint markets, which had expected the Fed to signal two cuts after a report earlier on Wednesday showed inflation slowing more than anticipated.

In a statement after a two-day meeting, the central bank acknowledged some recent gains in its efforts to control inflation, which has troubled Americans for the past three years. In early May, officials had cited a “lack of further progress” in their battle to curb price increases. Today’s announcement changed the language to “modest further progress” toward the inflation target.

The participants’ median average forecast for the Fed funds rates by the end of 2024 is 5.1%, for 2025, 4.1%, and for 2026, 3.1%.

Reiterating its commitment to its goals, the central bank has stated that it ‘does 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’ the Fed’s 2% goal. This reaffirmation of its stance is aimed at providing stability and confidence in the financial sector.

As the Fed reiterated in past meetings, the Committee will monitor the implications of incoming information for the economic outlook in determining the appropriate stance of monetary policy. The Committee is prepared to adjust monetary policy as necessary if risks arise that could impede the attainment of its goals. The Committee’s assessments will consider a wide range of information, including labor market conditions, inflation pressures and expectations, and financial and international developments.

Important Information:

Warren Gerow is an independent investment wealth consultant to Sightline Wealth Management.

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