The Federal Reserve signaled on Wednesday that it plans to cut interest rates three times this year, consistent with its previous outlook in December.
Fed officials expect the federal funds rate to peak at 4.6% in 2024, suggesting the Fed will cut rates by 0.75%. The Fed has changed policy by 25 basis points over the past year or so, meaning the central bank expects to cut rates three times in 2024.
Seventeen officials expect a rate cut this year, but only two predict no rate cut. Notably, only one official expects the Fed to cut interest rates by more than 0.75% this year, up from five times in December. No official expects interest rates to rise further in 2024.
The latest forecasts suggest the Federal Reserve will maintain a “prolonged high” policy stance as it works to return inflation to its 2% target.
Immediately after the announcement, markets priced in a nearly 60% chance that the U.S. Federal Reserve would begin lowering interest rates at its June meeting, up from 55% a day earlier, according to data from CME Group.
The central bank kept interest rates unchanged at a range of 5.25-5.5% at its board meeting held on Wednesday.
Along with the policy announcement, the Fed released its latest economic projections in its Summary Economic Outlook (SEP), which includes a “dot plot” that illustrates policymakers' expectations for where interest rates will go in the future.
SEP said the Fed expects core inflation to peak at 2.6% this year, above its December forecast of 2.4%, before falling to 2.2% in 2025 and 2.0% in 2026. Ta.
Officials expect the unemployment rate to rise to 4.0% in 2024, lower than the previous forecast of 4.1%. The unemployment rate is expected to rise to 4.1% in 2025 and return to 4.0% in 2026.
The Fed also raised its forecast for U.S. economic growth, with economic growth this year revised upward to 2.1% from the 1.4% forecast in December, declining slightly to 2.0% in 2025 and remaining at that level until 2026. is expected to be maintained.
The decision sent stock prices soaring, and the 10-year Treasury yield (^TNX) fell by about 4 basis points to trade around 4.25%.
alexandra canal I'm a senior reporter at Yahoo Finance. Follow her on Twitter @allie_canal, LinkedIn, Email alexandra.canal@yahoofinance.com.
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