Fed keeps rates steady, still sees three rate cuts this year

investing.com:

Investing.com — The Federal Reserve kept rates steady on Wednesday, and maintained forecasts for three rate-cuts this year, pointing to the central bank’s confidence that the recent strength in inflation is unlikely to derail the recent progress.

The Federal Open Market Committee, the FOMC, kept its benchmark rate in a range of 5.25% to 5.5%.

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%,