FILE – Federal Reserve Board Chair Jerome Powell speaks during his appearance before the House Financial Services Committee on Capitol Hill, March 6, 2024, in Washington. The Federal Reserve is set this week to leave interest rates unchanged for a fifth straight time.
In their new quarterly projections, Fed officials forecast that stronger growth and stubborn inflation would persist this year and next. As a result, they projected that interest rates would have to stay slightly higher for longer. Most economists have pegged the Fed’s June meeting as the most likely time for it to announce its first rate cut, which would begin to reverse the 11 hikes it imposed beginning two years ago. The Fed’s hikes have helped lower annual inflation from a peak of 9.1% in June 2022 to 3.2%. But they have also made borrowing much costlier for businesses and households.
Powell and the 18 other officials on the Fed’s interest-rate-setting committee have been considering how — or whether — those figures should affect their timetable for cutting rates. The central question is whether they have kept rates high enough for long enough to fully tame inflation. At the same time, the central bank faces a competing concern: If it waits too long to cut rates, a long period of high borrowing costs could seriously weaken the economy and even tip it into a recession.
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