Federal Reserve reveals June rate decision

investmentnews.com:

Federal Reserve officials penciled in just one interest-rate cut this year and forecast more cuts for 2025, reinforcing policymakers’ calls to keep borrowing costs high for longer to suppress inflation.

Officials voted unanimously to keep the benchmark federal funds rate in a range of 5.25% to 5.5% — a two-decade high first reached in July. But policymakers signaled they now expect to cut rates only once this year, compared to the three reductions forecast in March, according to the median projection.

They now see four cuts in 2025, more than the three previously outlined.

Individual officials’ views on the best path forward for borrowing costs, however, differed. The Fed’s “dot plot” showed four policymakers saw no cuts this year, while seven anticipated just one reduction and eight expected two cuts.

The Federal Open Market Committee adjusted language in its post-meeting statement released Wednesday, noting there has been “modest further progress toward the committee’s 2% inflation objective” in recent months. Previously, the statement pointed to a “lack” of further progress.

The change nods to more current data showing that price growth ebbed in April and May.

Fed officials have repeatedly said interest rates are likely to stay elevated for longer after price pressures picked up in the first quarter.

Data released earlier Wednesday offered some reassurance that progress toward their 2% inflation target has resumed. The so-called core consumer price index, which excludes food and energy, rose 0.2% in May and 3.4% from a year earlier, the slowest pace since 2021.

Before the decision, investors were betting the Fed would cut rates twice by year end, and saw a high likelihood of a first cut as soon as September, according