Virtually no one expects the Federal Reserve to lower interest rates when officials conclude their two-day meeting Wednesday. But economists and investors will be looking for clues as to when the central bank finally could cut its key rate and how many times it might do so this year.
The Fed’s benchmark, short-term rate has stood at a 23-year high of 5.25% to 5.5% since July as the Fed waits for inflation to cool further. Annual inflation dipped in April to 3.4% from 3.5% the prior month – far below the two-decade high of 9.1% in June 2022, but still above the Fed’s 2% goal.
Most economists have scaled back their rate cut predictions to two, one or none this year after inflation accelerated early this year. A few, including Minneapolis Fed President Neel Kashkari, have even suggested a rate hike is a slim possibility.
Coming into the year, many economists had predicted rates would already be falling. They expected as many as six or seven rate cuts this year.
Interest rates are the main tool the Fed uses to lower inflation. High rates make borrowing more expensive, which slows spending and the economy, generally easing inflation.
Learn more: Best credit cards of 2023
When will inflation cool enough for the Fed to cut rates?
Odds for a first cut in July are below 10%, but futures markets are still betting on one cut this year, probably in September as inflation resumes a gradual pullback in the months ahead, according to the CME FedWatch Tool, which measures market…
