WASHINGTON–The Federal Reserve’s Open Market Committee will conclude its two days of meetings today, and analysts universally expect them to adjourn without changing rates.
Indeed, if any rate cuts occur in 2024, it won’t be until at least June, most forecasters are saying. If the Fed does finally act to reduce rates, it will be the first time it has done so in four years following rapid increases from near-zero rates in a bid to temper inflation.
As CUToday.info has been reporting, although inflation has rapidly cooled since then, it remains higher than the Fed’s 2%, which is why economists believe the central bank will keep rates steady this week.
Inflation has proved stronger than many had expected. As CUToday.info reported, according to the Labor Department, consumer prices were up 3.2% last month over one year earlier. That’s slightly above the 3.1% many economists had predicted, and marks the second consecutive month of higher-than-expected price increases.
‘Fed Needs Convincing’
“Inflation increased in February higher than expected, reversing the encouraging easing trend observed in the last quarter of the previous year. Both headline and core prices showed a monthly increase of 0.4%—an annualized rate of 4.8%. The increase in housing and gas prices were the main drivers contributing over 60% of the headline number,” said America's Credit Unions’ Senior Economist Dawit Kebede in response to the numbers. “The Federal Reserve indicated repeatedly that it needs convincing data to show that inflation is heading to its target of 2% before it starts cutting rates. This target is based on the personal consumption index (PCE), which has lower weight on housing and reads lower than this consumer price index (CPI) report.
“However, the increase in the prices of other service items and commodity prices rising slightly after several months of decline in the CPI report may cause the Federal Reserve to be cautious before starting to cut rates,” Kebede added.
As CUToday.info reported here, Federal Reserve Chairman Jerome Powell said last week that if there is one rising cost that is playing an outsized role in inflation, it’s the cost of insurance.
The current federal funds rate is in a range of 5.25% to 5.5%.
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