The Federal Reserve revised its outlook for interest rate policy in 2024, signaling just one cut instead of the previously projected three cuts. This news disappointed investors hoping for more reductions in interest rates, but Fed Chair Jerome Powell emphasized that these projections are not set in stone. The dot plot released by the Fed showed a close call, with eight officials predicting one rate cut for 2024, while seven officials projected two cuts and four officials saw no easing at all this year.
Powell reiterated that these projections are merely forecasts and do not signify a strong commitment to a particular rate path. Market reactions to the revision were muted, with stocks reaching record highs despite the updated forecast. Investors continued to price in two rate cuts for the year starting in September as the most likely scenario based on data from the CME FedWatch Tool. The two key factors that will determine future rate cuts are the job market and progress on price stability, with softer inflation likely to prompt the Fed to cut policy rates in September according to Citi chief US economist Andrew Hollenhorst.
