Fed holds rates steady, hints rate cuts on hold until year-end
Updated at
The
The policy-making
Since then, the economy has remained strong, running firmly ahead of forecasts on the back of resilient consumer spending powered in part by a robust labor market. The Atlanta Fed's GDPNow forecasting tool, meanwhile, pegs current-quarter growth at around 3.9%.
That, however, has kept inflation rate elevated, with the Fed's preferred gauge, the core PCE price index, holding at around 2.8% over March and April, as employment and energy costs jumped and consumers continued to run down their pandemic-era savings.
It's also hammered market bets that the Fed, which as recently as March was forecasting three interest-rate cuts for this year, will start lowering borrowing costs anytime before the late autumn.
"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%," the Fed said in the statement that followed its rate decision.
"The Committee would be prepared to adjust the stance of monetary policy as appropriate if risks emerge that could impede the attainment of the Committee's goals," the statement added.
"The Committee's assessments will take into account a wide range of information, including readings on labor market conditions, inflation pressures and inflation expectations, and financial and international developments."
Market bets on a summertime rate cut have faded quickly in the face of stubborn inflation and a surprisingly resilient economy.
Related: Fed faces fine-line walk between inflation hawk and slow-growth realist
"The Committee will maintain the monthly redemption cap on agency debt and agency mortgage‑backed securities at
Benchmark 10-year
"The fact that inflation remains elevated means we're not going to see rate cuts very soon," said
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The
The most optimistic reading for 2024 rate cuts puts the year-end federal funds rate at between 4.5% and 4.75%, but the main odds suggest only one rate cut this year, which would leave it at between 5% and 5.25%.
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