From NBC Universal:

Federal Reserve officials concluded that interest rate cuts are likely in 2024, after agreeing to hold the benchmark rate steady between 5.25%-5.5%. However, the meeting summary noted a high level of uncertainty over how or if that will happen, and officials noted the progress made in battling inflation and balancing the labor market.

The “dot plot” of individual members’ expectations showed that participants expect cuts over the next three years to bring the overnight borrowing rate back down near the long-run range of 2%.

Despite the cautionary tone from Fed officials, markets expect the central bank to cut aggressively in 2024. Fed funds futures trading points to six quarter-point cuts this year, taking the fed funds rate down to a range between 3.75%-4%.

“Clear progress” had been made against inflation, with a six-month measure of personal consumption expenditures indicating that the inflation rate has edged below the Fed’s 2% target. However, progress has been “uneven” across sectors, with energy and core goods moving lower but core services still moving higher.

Officials also addressed the Fed’s effort to reduce the bond holdings on its balance sheet, indicating it likely would be appropriate to wind down the process when bank reserves “are somewhat above the level judged consistent with ample.” Discussions would begin well in advance of stopping the process so the public had plenty of notice.



Read more: Rate cuts likely, but path highly uncertain