12/6/2024–|Last updated: 6/12/202411:35 PM (Mecca time)
US Federal Reserve officials expected to cut interest rates only once during the remainder of this year after indicating the possibility of cutting them three times in estimates last March, amid the inflation rate approaching the 2% target more slowly than expected.
These estimates came in the updated average economic forecast published by the Federal Reserve on Wednesday, at the end of its two-day meeting yesterday and today, Wednesday, during which it kept the interest rate unchanged in the range of 5.25% to 5.5%.
Interest expectations
Policymakers expect interest rates to average 4.1% by the end of next year, suggesting four additional one-quarter percentage point cuts in 2025.
When the Federal Reserve issued its quarterly estimates last March, the majority of members of the Board of Governors expected to reduce the interest rate at least three times, by 25 basis points at a time, in both the current and next years.
According to these estimates, interest rates were hovering in the range of 3.75% to 4% by the end of next year.
Federal Reserve Chairman Jerome Powell said that expectations issued by Fed officials regarding inflation are “conservative” in nature.
He added during his speech after the meeting of the Federal Open Market Committee (Monetary Policy Committee) that the US Central Bank’s inflation expectations are “quite conservative” and may not be confirmed by upcoming data and that they are subject to adjustment.
He added that the CPI inflation data, which was better than expected, was welcomed by bank officials.
Rethink
A series of stronger-than-expected inflation data earlier this year forced US policymakers to reconsider their expectations and delayed the start of cutting interest rates in an economy that has proven more resilient in the face of high borrowing costs.
It is not yet clear how the updated forecasts were affected by the data released today, which showed that consumer prices remained stable last May on a monthly basis.
The US Central Bank has kept the interest rate in the current range since last July in an attempt to control inflation without causing significant harm to the labor market.
The updated forecasts show that 4 policymakers on the bank’s Board of Governors tend not to cut rates at all during the current year, compared to only two members who adopted this opinion in estimates last March.
7 Council members believe that cutting rates once will be appropriate by the end of the year, compared to 8 who believe that cutting them twice will be necessary.
