Fed pauses rate hikes, forecasts rate cut in 2024

On June 14, after a two-day policy meeting, the US Federal Reserve (Fed) decided to keep interest rates unchanged and forecast a 1% interest rate cut in 2024 when inflation falls faster.

The headquarters of the Federal Reserve (Fed) in Washington, DC

In a statement released at the end of the meeting that ended on June 14 local time, the Fed said that keeping interest rates unchanged would allow the agency to assess additional information and implications for monetary policy.

The Fed also said that further rate hikes would be based on an assessment of the cumulative tightening of monetary policy, the lags in which monetary policy affects economic activity, inflation, and economic and financial developments.

The Fed's decision to pause interest rate hikes ended a streak of 10 consecutive rate hikes that the agency had made since March 2022 to curb inflation and help keep the US policy interest rate in the range of 5% - 5.25%.

This decision is also in line with market expectations following recent developments related to the US economy, especially the US Department of Labor's report showing that the country's inflation rate in May fell to its lowest level in the past two years.

However, for monetary policy in the coming time, more than half of the 18 Fed policymakers forecast that interest rates could rise to 5.50% - 5.75% by the end of 2023. Meanwhile, 2 Fed officials said that interest rates will remain at current levels and 4 other officials said that a 0.25% increase may be appropriate.

The Fed's next meeting will be on July 25-26.

For 2024, policymakers also forecast a 1% cut to 4.6% and 3.4% for 2025, up from their March forecasts of 4.3% and 3.1%, respectively.

The changes in interest rate expectations came as members upgraded their economic growth forecasts, with an estimate that US GDP will increase by 1% compared to the 0.4% forecast in March. In addition, officials were more optimistic about the unemployment rate, predicting it will end this year at 4.1% compared to the 4.5% forecast in March.

On inflation, Fed officials raised their forecast to 3.9% for core CPI and lowered it slightly to 3.2% for core CPI.

(According to Baotintuc.vn)

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