Federal Reserve officials penciled in just one interest-rate cut this year and forecast more cuts for 2025, reinforcing policymakers' calls to keep borrowing costs high for longer to suppress inflation.
Officials voted unanimously to keep the benchmark federal funds rate in a range of 5.25% to 5.5% — a two-decade high first reached in July. But policymakers signaled they now expect to cut rates only once this year, compared to the three reductions forecast in March, according to the median projection.
They now see four cuts in 2025, more than the three previously outlined.
Individual officials' views on the best path forward for borrowing costs, however, differed. The Fed's "dot plot" showed four policymakers saw no cuts this year, while seven anticipated just one reduction and eight expected two cuts.
"The most recent inflation readings have been more favorable than earlier in the year, however, and there has been modest further progress toward our inflation objective," Chair Jerome Powell said Wednesday following the conclusion of a two-day meeting in Washington. "We'll need to see more good data to bolster our confidence that inflation is moving sustainably toward 2%."
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The Federal Open Market Committee adjusted language in its post-meeting statement, noting there has been "modest further progress toward the committee's 2% inflation objective" in recent months. Previously, the statement pointed to a "lack" of further progress.
Fed officials have repeatedly said interest rates are likely to stay elevated for longer after price pressures picked up in the first quarter. But the change nods to more current data showing that price growth ebbed in April and May.
Data released earlier Wednesday offered some reassurance that progress toward the Fed's 2% inflation target has resumed. The so-called core consumer price index, which excludes food and energy, rose 0.2% in May and 3.4% from a year earlier, the slowest pace since 2021.
Powell said the officials welcomed the latest figures, adding that he hopes for more reports like that. He added Wednesday's figures marked progress toward building confidence, but not to the degree that would warrant the central bank to lower interest rates at this time.
Other countries have already begun to lower borrowing costs. The European Central Bank cut interest rates last week, as did the Bank of Canada.