The Federal Reserve kept interest rates unchanged on Wednesday, but despite less optimistic projected progress toward the U.S. central bank’s 2% inflation target, officials said they still want to cut them by three-quarters of a percentage point by the end of 2024.
Inflation was defined as “elevated” in the Fed’s new policy statement, and revised quarterly economic estimates indicated that by year-end, the price index of personal consumption expenditures (excluding food and energy) will have increased at a 2.6% annual pace, as opposed to 2.4% in the December projections.
Nevertheless, despite recent increased inflation, 10 of the Fed’s 19 members still believe that the policy rate will decrease by at least three-quarters of a percentage point by the end of this year. This is consistent with the median position that was initially established in December.
The longer-term policy rate, which is a crucial metric, increased by 0.10 percentage points, from 2.5% to 2.6%, in line with the opinions of certain Fed members who believe that the economy can sustain higher interest rates in the long run.
In response to a spike in inflation that would eventually reach a 40-year peak, the Fed began an aggressive round of monetary policy tightening two years ago. However, since last July, the Fed has maintained its policy rate in the 5.25%–5.50% range.
