WASHINGTON–The Federal Reserve now only expects to reduce rates one time during 2024, according to statements released following the adjournment of its June meeting. That will be disappointing news to both credit unions and members hopeful of a reduction in rates.
The expectation when 2024 began was that the Fed would likely cut rates at least three times this year as inflation was gotten under control. But inflation has proved more stubborn than expected, and even with rates above 5% unemployment has not meaningfully risen and the economy has remained strong.
In its post-meeting policy statement, the Fed referred to recent inflation developments as being “modest.” Prior to the conclusion of the meeting, the Labor Department released its newest Consumer Price Index numbers, showing inflation at 3.3% through May.
The Fed’s newest economic projections reveal 11 of 19 of its policymakers now expect no more than one rate cut during 2024, with four Fed officials saying they believe there will be no cuts.
The Federal Open Markets Committee is next set to meet in July, with other meeting scheduled for September, November and December.
Looking to 2025, 2026
Looking further forward, Fed officials are now predicting four rate cuts in 2025, but as 2024’s forecast makes clear, that’s just a best guess.
Fed officials said they now anticipate core prices will rise 2.8% in the fourth quarter from a year earlier, up from 2.6% in their March projections, and then see core inflation slowing to 2.3% next year and 2% in 2026.
“The FOMC held rates at current levels and revised its rate outlook to show just one cut in 2024, down from three in the March estimate," said America's Credit Unions' Deputy Chief Economist Curt Long. "Committee member projections called for little progress on inflation on a year-over-year basis over the remainder of 2024, which Chair (Jerome) Powell attributed to base effects as inflation was relatively soft in the latter half of 2023. Nevertheless, America’s Credit Unions believes another month of encouraging inflation data would put two rate cuts during this calendar year squarely on the table.”
CPI Numbers Released
Earlier in the day, new data showed the consumer-price index rose 3.3% annually last month, according to new numbers from the Labor Department. Its report shows core prices that exclude volatile food and energy items climbed 3.4% from a year earlier.
Earlier in the day, prior to the Fed's release of a statement, Dawit Kebede, chief economist with America's Credit Unions, issued a statement saying, "Inflation cooled down in May following four consecutive months of high readings. Both headline and core inflation rose less than anticipated compared to prices a year ago. The Federal Reserve is expected to maintain rates steady in today's meeting. However, a similar report in the coming months could prompt a change, potentially leading to at least two rate cuts this year, despite strong job gains."
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