In its June meeting, the Federal Open Market Committee (FOMC) of the Federal Reserve unanimously voted to maintain the benchmark federal funds rate within a range of 5.25% to 5.5%. This decision was widely expected following a report on Wednesday that showed a slight easing in inflation for May.
Despite futures markets predicting at least two rate cuts by the end of 2024, as per CME Group data, FOMC’s latest “dot plot” indicated only one quarter-point reduction this year. The number of committee members favoring no cuts this year has also increased from two in March to four currently.
According to CNBC, economists surveyed by Dow Jones had predicted a monthly increase and an annual rate for Consumer Price Index (CPI) in May but BLS reported it remained unchanged from April with an increase of 3.3% from last year. The shelter index saw an increase while gasoline prices declined.
The statement released by FOMC acknowledged that although inflation has eased over the past year, it remains elevated and there has been modest progress towards their objective of reaching 2%. This is different from earlier statements which expressed concern about stalled progress.
However, there is indication through “dot plot” released on Wednesday that FOMC may take more aggressive measures towards reducing rates in 2025 with plans for four quarter-point cuts next year which would bring down federal funds rates by up to1 .25 percentage points compared to current levels.
