Fed holds rates steady, but leans hawkish with fewer rate cuts expected next year
By Yasin Ebrahim
Investing.com — The Federal Reserve kept rates steady on Wednesday, but continued to signal for one more rate hike this year and fewer rate cuts next year as the recent bout of economic strength calls for a tighter path of monetary policy.
The Federal Open Market Committee, the FOMC, kept its benchmark rate in a range of 5.25% to 5.5%. The Fed’s decision to hold rates steady followed recent evidence that its 11 rate-hikes delivered so far are starting to turn the tide in the battle against inflation.
The core personal consumption expenditures price index, or core PCE, which is closely watched by the Fed as a more accurate measure of underlying price pressures, slowed to 4.3% from 4.7% in the 12 months ending in August. That was the slowest pace since September 2021.
Still, a twelfth rate hike remains on the table as FOMC maintained their forecast for rates to peak at 5.5% to 5.75% this year, or 5.6% at the midpoint, according the Summary of Economic projections that accompanied the monetary policy statement.
In a sign that the Fed is committed to its higher-for-longer rate regime, Fed members now see the benchmark rate at 5.1% next year, suggesting just two rate cuts in 2024, compared with four rate cuts projected previously.
The tighter path of monetary policy has been driven by recent economic strength, Federal Reserve chairman Jerome Powell said in a press conference Wednesday.
«The stronger economic activity means that we have to do more with rates,» Powell said, addressing a question on why the Fed reduced the number of rate cuts for next year.
For 2025, interest rates are expected to drop to 3.9%, but that well above the 3.4% previously projected, and fall further to 2.9% in 2026.
But with
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