Fed Holds Rates Steady, Projects Only One Cut in 2024 Amid Inflation Fight

The Federal Reserve held interest rates steady on Wednesday, maintaining the policy rate in the 5.25%-5.50% range. This decision comes amid rising estimates for the measures needed to curb inflation, with Fed officials projecting only a single rate cut for 2024. This marks a shift from the three cuts anticipated in March, despite acknowledging "modest further progress" towards the 2% inflation target. This adjustment removes the likelihood of a rate cut before the U.S. presidential election on November 5. Stocks held gains immediately after the Fed's statement and updated projections, while the U.S. dollar and Treasury yields pared losses. Traders continue to price in a September start to policy easing, expecting a second cut by year-end. However, the Fed's slower approach indicates a more cautious stance, reflecting the ongoing challenge of balancing economic growth with inflation control. The policy rate is expected to decrease by a full percentage point in both 2025 and 2026. Market Overview:

• Fed maintains policy rate in 5.25%-5.50% range.
• Only one rate cut projected for 2024, down from three cuts anticipated in March.
• Stocks and Treasuries react positively to the Fed's announcement.

Key Points:

• Fed acknowledges modest progress towards 2% inflation target.
• Economic growth expected to be slightly above trend at 2.1% for the year.
• Unemployment rate projected to remain at 4% through year-end.

Looking Ahead:

• Market expects a September start to Fed's policy easing.
• Fed's cautious approach reflects the need for ongoing inflation control.
• Future rate cuts likely to be gradual, with significant reductions in 2025 and 2026.

The new projections suggest that Fed officials are wrestling with mixed economic signals. Despite no month-over-month rise in consumer prices for May, the economy continues to show steady growth and job creation. The central bank's statement indicates that higher rates may be necessary for a longer period to fully address inflation, reflecting a significant policy adjustment. Fed Chair Jerome Powell will provide further insights during his press conference at 2:30 p.m. EDT, discussing the outcome of the two-day meeting and elaborating on the Fed's strategy to manage economic stability and inflation control.