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Fed leaves rates unchanged, sees just one cut in 2024

STORY: :: Federal Reserve leaves rates unchanged with

officials projecting only a single rate cut in 2024

::June 12, 2024

::Jerome Powell, Federal Reserve Chair

::Washington, D.C.

"My colleagues and I are acutely aware that high inflation imposes significant hardship as it erodes purchasing power, especially for those least able to meet the higher costs of essentials like food, housing and transportation. Our monetary policy actions are guided by our dual mandate to promote maximum employment and stable prices for the American people. In support of these goals, the committee decided at today's meeting to maintain the target range for the federal funds rate at five and a quarter to 5.5%, and to continue reducing our securities holdings. As labor market tightness has eased and inflation has declined over the past year, the risks to achieving our employment and inflation goals have moved toward better balance. The economic outlook is uncertain, however, and we remain highly attentive to inflation risks. We've stated that we do not expect it will be

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appropriate to reduce the target range for the federal funds rate, until we have gained greater confidence that inflation is moving sustainably toward 2%. So far this year, the data have not given us that greater confidence."

The markdown in the outlook for rate cuts, from three quarter-percentage-point reductions seen in the Fed's March projections, occurred despite the central bank's acknowledgement in its new policy statement of "modest further progress" towards its 2% inflation target - an upgrade from its May 1 statement. It likely removes the possibility of a rate cut before the Nov. 5 U.S. presidential election.

The move also coincided with an increase to 2.8% in the estimated long-run, or "neutral," rate of interest from 2.6%, which indicates policymakers have concluded the economy needs more restraint to finish the battle against rising prices.

Recent progress has been slow, and Fed officials now project a slightly higher end-of-year inflation rate of 2.6% versus the 2.4% anticipated as of March.