The Federal Reserve indicated today that it’s nearing a long-awaited shift toward cutting interest rates, a sign that officials are confident that they are close to fully taming inflation, according to the Associated Press.
The Fed kept its key rate unchanged at about 5.4%, a 22-year high, but in a statement, it signaled a shift by dropping previous wording that had said it was still considering further hikes.
Still, the central bank cautioned that it “does not expect it will be appropriate” to cut rates “until it has gained greater confidence that inflation is moving sustainably” to its 2% target. That suggests that a reduction is unlikely at its next meeting in March.
The overall changes to the statement — compared with its last meeting in December — indicate that the Fed has definitively shifted toward considering rate reductions. In December, officials signaled that they would implement three quarter-point rate cuts this year. Yet they have said little about the timing of when those cuts would begin, though senior officials earlier this month had emphasized that the Fed would proceed cautiously.
Most economists say they expect the Fed to start cutting its benchmark rate in May or June. Rate cuts would eventually lead to lower borrowing costs for America’s consumers and businesses, including for mortgages, auto loans, and credit cards.
