Federal Reserve officials signaled that interest rates could stay higher this year as policymakers pause to ensure they’ve stamped out inflation.
Federal Reserve officials left interest rates unchanged at their June meeting on Wednesday and predicted that they will cut borrowing costs just once before the end of 2024, taking a cautious approach as they try to avoid declaring a premature victory over inflation.
While the Fed had been expected to leave rates unchanged, its projections for how interest rates may evolve surprised many economists.
When Fed officials last released quarterly economic estimates in March, they anticipated cutting interest rates three times this year. Investors had expected them to revise that outlook somewhat this time, in light of stubborn inflation early in 2024, but the shift to a single cut was more drastic.
Jerome H. Powell, the Fed chair, made clear in a postmeeting news conference that officials were taking a careful and conservative approach after months of bumpy inflation data.
With price increases proving volatile and the job market remaining resilient, policymakers believe they have the wiggle room to hold interest rates steady to make sure they fully stamp out inflation without running too much of a risk to the economy. But the Fed chair also suggested that more rate cuts could be possible depending on economic data.
“Fortunately, we have a strong economy, and we have the ability to approach this question carefully — and we will approach it carefully,” Mr. Powell said. He added that “we’re very much keeping an eye on downside economic risks, should they emerge.”
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+
10
%
Inflation
+
8
+
6
+3.4%
excluding
food and
energy
+
4
+3.3%
in May
+
2
0
–
2
’05
’10
’15
’20
+
14
%
+
12
Inflation
+
10
+
8
+3.4%
excluding
food and
energy
+
6
+
4
+3.3%
in May
+
2
0
–
2
1965
’70
’75
’80
’85
’90
’95
2000
’05
’10
’15
’20
+
14
%
+
12
Inflation
+
10
+
8
+
6
+3.4% excluding
food and energy
+
4
+3.3% in May
+
2
0
–
2
1965
’70
’75
’80
’85
’90
’95
2000
’05
’10
’15
’20
Where Fed Officials Expect Rates Will Be
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Actual
target rate
Latest
projections
6
%
5.5%
5
4
Each dot represents what one Fed official thinks the target rate should be at the end of this year and the next.
3
2
1
0
’21
’22
’23
’24
’25
Actual
target rate
Latest
projections
6
%
5.5%
5
4
Each dot represents what one Fed official thinks the target rate should be at the end of this year and the next.
3
2
1
0
’21
’22
’23
’24
’25
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Source: Economy - nytimes.com
