The Federal Reserve made a decision to maintain interest rates at a 23-year high during its recent policy meeting, opting to keep its benchmark interest rate in a range of 5.25%-5.50%. While there was a slight reduction in the estimate of rate cuts this year, with officials predicting only one cut instead of three, the Fed also revised its forecast for next year to include a median of 4 additional rate cuts in 2025, up from a previous estimate of 3.
Despite a slight increase in the inflation outlook for 2024, Fed officials expressed cautious optimism in their policy statement, acknowledging some progress towards their 2% inflation objective. However, they emphasized the need for further confirmation before considering any rate cuts. Fed chair Jerome Powell highlighted the importance of carefully approaching the decision, recognizing the risks associated with waiting too long or acting too soon in response to inflation trends.
The Fed’s decision to maintain rates was unanimous, with officials retaining their unemployment and GDP outlook for the year. The central bank also raised its neutral rate outlook to 2.8% and acknowledged the need for more data to support any future rate cut decisions. Overall, the Fed’s cautious approach reflects a balance between addressing inflation concerns and supporting economic growth in the coming months.
