The Federal Reserve left its benchmark interest rate unchanged Wednesday for the second time in its past three meetings, according to the Associated Press, a sign that it’s moderating its fight against inflation as price pressures have eased.
The Fed’s policymakers also signaled that they expect to raise rates once more this year and envision their key rate staying higher in 2024 than most analysts had expected.
As their latest policy meeting ended, the 19 members of the Fed’s rate-setting committee conveyed growing optimism that they will manage to slow inflation to their 2% target without causing the deep recession that many economists had feared. It’s a hopeful scenario that economists call a “soft landing.”
In a set of new quarterly projections, the policymakers showed that they expect faster economic growth and lower unemployment this year and next year than they had foreseen just three months ago. Even with solid growth in sight, they also think inflation will continue to cool.
The Fed’s latest decision kept its benchmark rate at about 5.4%, the result of the 11 rate increases it unleashed beginning in March 2022. Those rapid hikes, Powell said, now allow the central bank to take a more measured approach to its rate policy.
Fed officials expect to cut interest rates just twice next year, fewer than the four rate cuts they had forecast in June. They predict that their key short-term rate will still be 5.1% at the end of 2024 — higher than it was from the 2008–2009 Great Recession until May of this year.
Yet one reason they likely have reduced the number of expected rate cuts for 2024 is a positive one: They think a recession, which would require multiple rate cuts to aid the economy, is less likely to occur.
Treasury yields moved sharply higher Wednesday after the Fed issued a statement after its latest policy meeting and updated its economic projections.
