Federal Reserve officials signaled Wednesday they still expect to cut their key interest rate three times in 2024.
Federal Reserve Board Chair Jerome Powell speaks during a news conference about the Federal Reserve's monetary policy at the Federal Reserve, Dec. 13, 2023. officials signaled Wednesday they still expect to cut their key interest rate three times in 2024, fueling a rally on Wall Street, despite signs that inflation remained elevated at the start of the year.
In new quarterly projections they issued, the policymakers forecast that stronger growth and inflation above their 2% target level would persist into next year. Overall, the forecasts suggest that the Fed still expects an unusual combination: A healthy job market and economy in tandem with inflation that continues to cool — just more gradually than they had predicted three months ago.Powell noted that the Fed faces “two-sided” risks as it seeks to determine the timing of its rate cuts.
The financial markets cheered the message Wednesday from Powell and the Fed, with traders sending the Dow Jones industrial average surging 1%, to another all-time high. Most economists have pegged the Fed’s June meeting as the most likely time for it to announce its first rate cut, which would begin to reverse the 11 hikes it imposed beginning two years ago. The Fed’s hikes have helped lower annual inflation from a peak of 9.1% in June 2022 to 3.2%. But they have also made borrowing much costlier for businesses and households.
“There’s no urgency for them,” said Luke Tilley, chief economist at Wilmington Trust, a wealth management company. “They’ve got a strong economy, strong labor market.”In most respects, the U.S. economy remains healthy. Employers keep hiring, unemployment remains low, and the stock market is hovering at record highs.
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