Federal Reserve officials maintained their outlook for three interest rate cuts this year and moved to slow the pace of reducing their bond holdings, suggesting they are not alarmed by a recent rise in inflation.
Officials unanimously decided to keep the benchmark federal funds rate in the range of 5.25% to 5.5%, the highest since 2001, for the fifth consecutive meeting. Policymakers have signaled they remain on track to cut rates this year for the first time since March 2020, but they now forecast just three reductions in 2025, down from the four predicted in December based on the median projection. The federal funds rate is expected to drop as low as 4.6% by the end of 2024,
Wall Street’s main stock indexes closed higher on Wednesday, hitting record levels, after the FED calmed investor jitters by keeping borrowing costs unchanged and reinforcing expectations that rates could be cut by up to three times this year.
The FED’s policy statement described inflation as remaining “elevated,” and raised its projections for economic growth and lowered its projection for the unemployment rate from the estimates provided in December.
After raising the benchmark federal funds rate by more than five percentage points starting in March 2022, Fed officials have emphasized that they are in no rush to reduce borrowing costs until they are sure inflation is contained.
Policymakers also slightly improved their forecasts for long-term rate stabilization, increasing their median estimate from 2.5% to 2.6%, following speculation from economists that higher rates could persist in the post-economic environment. -pandemic. The change implies that rates will need to stay higher for longer in the future.
Policymakers updated their projections for inflation and economic growth for 2024, increasing their forecast for underlying inflation from 2.4% to 2.6% and increasing the growth forecast from 1.4% to 2.6% %. They also slightly reduced their projection for the unemployment rate from 4.1% to 4% at the end of 2024. If these data are confirmed, Joe Biden will be in a better position to face Trump in the November 2024 elections.
By Economic Editor
Angola Portal
2024-03-21 00:04:07