Fed leaves rates alone; still foresees 3 cuts this year
WASHINGTON >> Federal Reserve officials signaled that they still expect to cut their key interest rate three times in 2024, fueling a rally on Wall Street, despite signs that inflation remained elevated at the start of the year.
For now, the officials kept their benchmark rate unchanged for a fifth straight time.
Speaking at a news conference Wednesday, Chair Jerome Powell said the surprising pickup in inflation in January and February hadn’t fundamentally changed the Fed’s picture of the economy: The central bank still expects inflation to continue to cool, though more gradually than it thought three months ago.
Those recent high inflation readings followed six months of steady slowdowns in price increases. Economists and Wall Street investors were looking for some clarification Wednesday about how the latest inflation reports were viewed at the Fed.
Powell said the January and February data “haven’t really changed the overall story, which is that of inflation moving down gradually on a sometimes bumpy road towards 2%,” with rate cuts to follow.
In new quarterly projections, the policymakers forecast that stronger growth and inflation above their 2% target level would persist into next year. Overall, the forecasts suggest that the Fed still expects an unusual combination:
A healthy job market and economy in tandem with inflation that continues to cool — just more gradually than they had predicted three months ago.
Powell noted that the Fed faces “two-sided” risks as it seeks to determine the timing of its rate cuts.
“We’re in a situation,” the Fed chair said, “where if we ease too much or too soon, we could see inflation come back. And if we ease too late, we could see unnecessary harm to employment.”