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The decision to keep rates steady for the fifth meeting in a row was widely expected as the Fed chair Jerome Powell previously hinted that March was too soon for the members to have enough confidence from incoming economic data to cut rates.
Fed members continue to see the benchmark rate falling to 4.6% next year, suggesting three rate cuts in 2024, unchanged from the prior projection in December. For 2025 and 2026, however, the Fed sees fewer rate cuts, forecasting rates to fall to 3.9% next year and 3.1% in 2026, up from prior forecasts of 3.6% and 2.9%, respectively.
The unchanged decision on the rate path for 2024 comes even as Fed members upgraded their forecasts for inflation and growth this year.
The core personal consumption expenditures price index, the Fed’s preferred measure of inflation, is forecast to be 2.6% in 2024, up from a prior forecast of 2.4%. For 2025 and 2026, inflation is estimated to be 2.2% and 2% unchanged from the prior forecast.
The moderate uptick in the inflation outlook for 2024 suggest that recent upside surprise in inflation data haven’t yet shaken the Fed’s confidence that a stronger economy and labor market aren’t likely to spark another wave of inflation.
Fed members now see the economic growth, or gross domestic product, at 2.1% this year, up from a prior forecast of 1.4%, before slowing to 2% in the 2025 and 2026 from 1.8% and 1.9%, respectively.
The Labor Market,
meanwhile, is expected to remain robust, with the unemployment rate seen at 4% this year, down from a prior projection of 4.1%.
At the press conference that followed the decision, Federal Reserve Chairman Jerome Powell said the fed act sooner on rate cuts if the labor market unexpectedly weakened.
“If there were significant weakening in the data, particularly in the labour market, that could also be a reason for us to begin the process of reducing rates,” Powell said.