Fed Holds Rates Steady, Sees Just One Cut in 2024 Despite Inflation Progress

Fed Holds Rates Steady, Sees Just One Cut in 2024 Despite Inflation Progress

Keywords: Federal Reserve, Interest rates, Inflation, Economic outlook

Washington, D.C. – The Federal Reserve (Fed) kept interest rates unchanged at its policy meeting on Wednesday and signaled a more cautious outlook for the economy, projecting just one quarter-point rate cut next year despite progress in cooling inflation.

The Fed’s decision to hold rates steady at 4.50%-4.75% was widely anticipated by economists. However, the central bank’s revised economic projections suggest a more conservative view on the trajectory of inflation and economic growth.

The Fed now expects inflation to remain elevated through 2023, with the core personal consumption expenditures (PCE) index, the Fed’s preferred inflation measure, averaging 3.1% this year, down from its previous projection of 3.5%. However, inflation is not expected to fall to the Fed’s 2% target until after 2024.

Despite the progress in bringing down inflation, the Fed is concerned about downside risks to economic growth. The central bank now projects GDP growth of just 0.5% in 2023, significantly below the 1.2% it predicted in December.

“We still have a ways to go to get inflation back down to our 2% goal,” Fed Chair Jerome Powell said in a press conference following the meeting. “We’re not going to declare victory and say our job is done.”

The Fed also indicated that it will likely raise rates further in the coming months if inflation remains stubbornly high. Powell emphasized that the central bank is “strongly committed” to bringing inflation under control.

The Fed’s decision to hold rates steady and project a more dovish outlook on the economy has been met with mixed reactions from investors and economists. Some analysts argue that the Fed is being overly cautious and should continue raising rates to bring inflation down more quickly. Others believe that the Fed is taking the appropriate steps to balance its goals of controlling inflation and promoting economic growth.

The Fed’s next policy meeting is scheduled for March 21-22.