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Federal Reserve Maintains Interest Rates with One Cut Projected for End of 2024

Overview

On Wednesday, the Federal Reserve announced that it would maintain the federal funds rate range at 5.25% to 5.5%, a level held steady since July 2023. This decision aligns with expectations given the current economic indicators and inflation trends.

Economic Indicators

Several economic indicators are trending positively. The recent inflation report showed:

  • Overall Inflation: Increased by 3.3% over the 12 months ending in May.
  • Core CPI: Rose by 3.4% over the same period.

These figures were better than anticipated, indicating a cooling in inflationary pressures.

Federal Reserve’s Stance

Federal Reserve Chair Jerome Powell emphasized the need for more consistent data before the central bank considers easing its policy. During a press conference, Powell remarked:

“So far this year, the data have not given us greater confidence. The most recent inflation readings have been more favorable than earlier in the year, however, and there has been modest further progress toward our inflation objective”.

Future Projections

Despite the current hold on interest rates, the Federal Reserve has projected just one rate cut by the end of 2024. This reflects a cautious approach, prioritizing a sustainable move toward the 2% inflation target. Powell noted that while there has been progress, the Fed seeks greater assurance that inflation is moving sustainably toward the target before making rate cuts.

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Upcoming Meetings

The Federal Reserve has four more meetings scheduled for 2024:

  • July 30-31
  • September 17-18
  • November 6-7
  • December 17-18

These meetings will be critical for assessing further economic data and determining any changes in monetary policy.

Conclusion

The Federal Reserve’s decision to keep interest rates unchanged reflects a careful approach to managing inflation and economic stability. With one rate cut projected by the end of 2024, the central bank remains focused on its long-term goals of achieving maximum employment and stable inflation.

Sources:

  1. Published Wed, Jun 12 2024 – CNBC
  2. Federal Reserve officials’ comments and projections, June 12, 2024.
  3. Federal Reserve meeting schedule for 2024.

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