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Fed holds interest rates, as expected

US policymakers still pointing to three 0.25% rate cuts this year.

21 March 2024

The US Federal Reserve (Fed) maintained rates at the 5.25% to 5.5% target range, as expected, in their latest Federal Open Market Committee meeting. Citing much the same narrative as from the previous meeting communique, they still note that they need greater confidence that inflation is moving sustainably towards the 2% target before cutting rates. The released dot-plot projections still point to three rate cuts of 25 basis points each for this year, so no new news there. But the median dot-plot for next year has now risen from their previous forecast of 3.6% to 3.9%. This could be seen as bearish for markets, but for now they are happy that they will still see three cuts this year– it seems next year’s prediction is not part of the current focus, but in time of course it will be.

A US economy that continues to run solidly arguably does not require easier monetary conditions and the longer the economy stays up in the air, rather than coming in for a soft landing, and more specifically the 2% inflation rate remains elusive, three cuts this year might be seen in hindsight as slightly exuberant.

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