Fed Opts Not to Cut Rates, Indicates 3 Rate Cuts Coming; CU Economist Says It's Keeping 'Options Open'

WASHINGTON–As expected, the Federal Reserve’s Open Markets Committee adjourned its meeting without cutting rates, but it also indicated it will likely cut rates three times during the remainder of 2024. 

The Fed continues to be concerned about the pace of inflation, which has remained stronger than many analysts have expected after it appeared it was cooling, held the federal funds rate in a range between 5.25% and 5.5%, a 23-year high.

While inflation remains above the Fed’s 2% target rate, other indicators, such as cooler spending by consumers and a potential slowdown in hiring, indicate the Fed’s rate increases are having their desired effect. 

In a statement at the conclusion of its meeting, which was similar to that it issued in January, the Fed said, “Recent indicators suggest that economic activity has been expanding at a solid pace. Job gains have remained strong, and the unemployment rate has remained low. Inflation has eased over the past year but remains elevated…Committee judges that the risks to achieving its employment and inflation goals are moving into better balance. The economic outlook is uncertain, and the Committee remains highly attentive to inflation risks.

‘Careful Assessment’

“In considering any adjustments to the target range for the federal funds rate, the Committee will carefully assess incoming data, the evolving outlook, and the balance of risks,” the statement continued. “The Committee does not expect it will be appropriate to reduce the target range until it has gained greater confidence that inflation is moving sustainably toward 2%. In addition, the Committee will continue reducing its holdings of Treasury securities and agency debt and agency mortgage-backed securities, as described in its previously announced plans.”

ACU's Perspective

America's Credit Unions Vice President of Research and Chief Economist Curt Long thinks the Fed is still on the fence regarding rate cuts.

“The FOMC narrowly retained its projection for three rate cuts in 2024. Given the array of mixed data at present, including solid overall growth, an upward drift to unemployment, warming inflation, and concerns that faulty seasonal adjustments could be tainting all the above, the FOMC is keeping its options open. A June rate cut is possible, but it will hinge on the next two inflation prints.” 

The Fed’s economic projections can be found here.