Fed still sees three rate cuts in 2024 despite sticky inflation

WASHINGTON -- The Federal Reserve held interest rates steady on Wednesday, but policymakers indicated they still expect to reduce them by three-quarters of a percentage point by the end of 2024 despite stodgier expected progress towards the U.S. central bank's 2% inflation target.

The Fed's new policy statement described inflation as remaining "elevated," and updated quarterly economic projections showed the personal consumption expenditures price index excluding food and energy rising at a 2.6% rate by the end of the year, compared to 2.4% in the projections issued in December.

Still, 10 of the Fed's 19 officials still see the policy rate falling at least three-quarters of a percentage point by the end of this year, a median view first set in December and maintained despite recent stronger-than-expected inflation.

The sentiment was slightly more hawkish though. Eleven officials in December had seen three quarter-percentage-point cuts on tap for the year, and the new policy view came alongside an upgraded outlook for the economy. Growth is now seen at 2.1% for the year compared to just 1.4% projected in December, while the unemployment rate is seen ending the year at 4%, lower than the 4.1% anticipated in December and barely changed from the 3.9% jobless rate recorded in February.

One key measure, the longer-run policy rate, was moved higher by a tenth of a percentage point, from 2.5% to 2.6%, reflecting the views of some Fed officials that the economy can support higher interest rates overall in the future.

The Fed kicked off an aggressive monetary policy tightening cycle two years ago in response to a surge in inflation that would eventually hit a 40-year peak, but it has kept its policy rate in the 5.25%-5.50% range since