The Federal Reserve now expects one 0.25% interest rate cut this year, according to its latest economic forecast summary, down from three 0.25% rate cuts it predicted in March.
The Fed’s forecast for annual inflation in 2024 rose to 2.6% from 2.4% as core inflation, which excludes less volatile items such as energy and food, as measured by the Commerce Department’s personal consumption expenditures (PCE) price index, was also revised up to 2.8% from 2.6%.
The Fed sees annual inflation falling to 2.3% next year and 2% in 2026.
The unemployment rate forecast remains unchanged at 4% from March and remains at that level after rising slightly in May.
Gross domestic product (GDP) growth forecast also remained stable at 2.1% annually.
Investors are betting that further rate cuts will come this year, which would lower borrowing costs and boost the stock market.
But a series of unexpectedly strong employment reports and rising prices earlier this year dampened those expectations.
Payrolls rose by 272,000 in May, beating expectations of around 190,000, while the unemployment rate rose slightly to 4% from 3.9%.
Inflation also rose to 3.4% in March before falling again in April and May. The Consumer Price Index (CPI) on Wednesday rose 3.3% from a year earlier as food prices fell for the fourth straight month.
The Fed on Wednesday kept interest rates unchanged at a range of 5.25% to 5.5%.
The Fed’s interest rate setting committee said “risks to achieving our employment and inflation objectives have moved more balanced over the past year,” but added that recent progress has been “moderate.”
Inflation in the housing sector has lagged behind other markets and remains fairly high at 5.4%, resulting in slow home sales in recent months.
