WASHINGTON (AP) — Federal Reserve officials signaled Wednesday that they still expect to cut their key interest rate three times in 2024 despite signs that inflation stayed surprisingly high at the start of the year.
WASHINGTON — Federal Reserve officials signaled Wednesday that they still expect to cut their key interest rate three times in 2024 despite signs that inflation stayed surprisingly high at the start of the year. Yet they foresee fewer rate cuts in 2025, and they slightly raised their inflation forecasts.
Speaking at a news conference, Chair Jerome Powell noted that inflation has cooled considerably from its peak. But, he added,"inflation is still too high, ongoing progress in bringing it down is not assured and the path forward is uncertain.” The Fed's policymakers now foresee three rate cuts in 2025, down from four in their December projections. They expect “core” inflation, which excludes volatile food and energy costs, to still be 2.6% by the end of 2024, up from their previous projection of 2.4%. In January, core inflation was 2.8%, according to the Fed's preferred measure.
When the Fed raises its benchmark rate above the neutral rate, it seeks to slow growth and tame inflation. If the neutral rate is actually higher than the Fed had thought, it means its key rate should be higher, too, to cool the economy and inflation. Powell and the 18 other officials on the Fed’s interest-rate-setting committee have been considering how — or whether — those figures should affect their timetable for cutting rates. The central question is whether they have kept rates high enough for long enough to fully tame inflation.
At the same time, the central bank faces a competing concern: If it waits too long to cut rates, a long period of high borrowing costs could seriously weaken the economy and even tip it into a recession.
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