As broadly expected, the Fed kept interest rates unchanged in a range of 5.25% to 5.50% following its two-day monetary policy meeting. Based on new economic projections, Fed officials expect one rate cut this year and another four in 2025. Four policymakers feel the Fed should not cut rates at all this year, the fresh projections show, while seven believe a single cut will suffice.
Policymakers are now penciling in a fourth-quarter inflation rate of 2.6%. That’s slightly higher than the 2.4% the so-called “dot plot” projections showed in March. Core inflation, minus food and energy costs, is projected to be at 2.8% at the end of this year, up from the median projection of 2.6% in March.
Fed officials left their forecasts for U.S. economic growth unchanged at 2.1% this year and 2.0% in 2025.
Fed Chair Jerome Powell said policymakers will need to see more positive data, including “good inflation readings” before it feels confident enough to lower interest rates, noting inflation remains too high. But he noted, “If the labor market were to weaken unexpectedly or if inflation were to fall more quickly than anticipated, we’re prepared to respond.” He also said officials were well aware of both the risks if it moves too slowly or too quickly on easing monetary policy.