Fed officials still expect to cut rates by 75 basis points this year

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US Federal Reserve officials still expect to cut interest rates by 75 basis points this year, signalling confidence that inflation is cooling sufficiently to reduce borrowing costs.

The rate forecasts, published by the US central bank on Wednesday, came as the Federal Open Market Committee voted unanimously to leave rates unchanged at a 23-year high of 5.25 per cent to 5.5 per cent.

The Fed’s so-called dot plot showed that a growing number of officials were coalescing around the view that rates will end 2024 at 4.5 per cent to 4.75 per cent, equivalent to three 25 quarter-point cuts, in line with December’s dot plot.

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The Fed’s policy statement was little changed from its vote in January, though a reference to a slowdown in the labour market was removed. “Job gains have remained strong, and the unemployment rate has remained low,” the FOMC said.  

Stocks rose and Treasury yields fell after the Fed kept three cuts on the table for 2024. The blue-chip S&P 500 rose to an all-time intraday high. The two-year Treasury yield, which moves with interest rate expectations, fell to its lowest level in a week. 

This is a developing story


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