US Federal Reserve planning one rate cut this year

The US Federal Reserve has signalled that it will cut its key interest rate just once this year despite inflation easing.

 

Back in March, the central bank had been expected to reduce borrowing costs three times by the end of 2024.

 

However, on Wednesday, new forecasts from Fed officials who make decisions on rates pencilled in a single reduction.

 

The new outlook emerged after the Fed voted to hold interest rates at their current 23-year high even as inflation ticked lower.

 

Inflation slowed to 3.3% in the year to May. That compares with 3.4% in the 12 months to April.

 

However, between April and May inflation was unchanged and it remains above the Fed’s 2% target.

 

Jerome Powell, chair of the Federal Reserve, said that only “modest” progress had been made on hitting the target and the central bank would need to see “good inflation readings” before interest rates can be cut.

 

US interest rates were held at 5.25%-5.5%.

 

Officials at the US Fed were split over how many interest rate cuts they expected this year. Of the 19 policymakers who gave their outlook, four expected no cut, seven forecasted one reduction while eight thought there would be two.

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