Fed keeps rate stable and signals only one cut in 2024

In a crucial decision for the financial market, the Federal Reserve (Fed) chose to maintain interest rates between 5.25% and 5.50%, a level that had not been observed for 23 years. This resolution came to light at the end of the monetary policy meeting that lasted two days, marking a moment of stability since July 2023.

What surprised analysts was the revision in the number of rate cuts expected for the current year. Initially, there were expectations of three reductions, but the current scenario has adjusted to just one cut. That adjustment was a close call, revealing a delicate balance in the projections: eight Fed officials projected two cuts, while seven saw the possibility of just one. Interestingly, four authorities do not foresee rate reductions for this year.

For next year, expectations are more optimistic. Fed officials now anticipate needing four rate cuts, an increase from the three cuts anticipated in March. This change reflects an adaptation to future economic conditions that have yet to fully unfold.

Inflation was also a topic of review during the meeting. Projections for 2024 were high, with inflation expected to end the year at 2.8%, above the 2.6% previously forecast. This adjustment came after analyzes of the main Personal Price Expenditures (PCE) index, a preferred measure of the Fed for this indicator.

Interesting to note the change in language in the Fed’s policy statement, from a lack of further progress toward the 2% inflation target to “modest additional progress.” Despite this change, the statement reiterated the need for confirmation that inflation is sustainably heading towards the 2% target before any rate reductions are considered.

“The Committee does not expect it to be appropriate to reduce the target range until it has gained greater confidence that inflation is moving sustainably towards 2 percent,” the statement emphasized.

At the time of publication, the price of BTC was quoted at US$68,996.29, up 3% in the last 24 hours.

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