WASHINGTON (dpa-AFX) - While announcing its widely expected decision to leave interest rates unchanged on Wednesday, the Federal Reserve also revealed officials now expect only one interest rate cut this year.
In support of its goals of maximum employment and inflation at the rate of 2 percent over the longer run, the Fed said it decided to maintain the target range for the federal funds rate at 5.25 to 5.50 percent.
The Fed acknowledged modest further progress toward its inflation objective in recent months but said officials still need 'greater confidence' inflation is moving sustainably towards the target before they will consider lowering rates.
The continued need for 'greater confidence' inflation is slowing was reflected in the Fed officials' forecast for interest rates.
The latest projections showed officials now expect rates in a range of 5.0 to 5.25 percent by the end of 2024, suggesting just one rate cut this year compared to the three forecast in March.
The reduction in the number of expected rate cuts comes as Fed officials raised their forecasts for consumer price growth at the end of the year.
The forecast for consumer price growth was raised to 2.6 percent from 2.4 percent in March, while the forecast for core consumer price growth was increased to 2.8 percent from 2.6 percent. Core consumer prices exclude food and energy prices.
Earlier in day, the Labor Department released a report showing a slowdown in the pace of consumer price growth in the month of May, although the rate of growth remained well above the Fed's 2.0 percent objective.
The report said the annual rate of consumer price growth slowed to 3.3 percent in May from 3.4 percent in April. Economists had expected the pace of growth to remain unchanged.
The annual rate of core consumer price growth also slowed to 3.4 percent in May from 3.6 percent in April. The pace of growth was expected to dip to 3.5 percent.
Meanwhile, Fed officials left their forecasts for GDP growth and the unemployment rate unchanged from March at 2.1 percent and 4.0 percent, respectively.
The Fed reiterated any future changes to interest rates would involve a careful assessment of incoming data, the evolving outlook, and the balance of risks.
The central bank's next monetary policy meeting is scheduled for July 30-31, with CME Group's FedWatch Tool currently indicating an 89.3 percent chance the Fed will leave rates unchanged once again.
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