Fed Meeting Today: Rate Decision, Jerome Powell’s Speech, and What Else to Watch Today

The Federal Reserve kicked off the year in neutral, opting to keep interest rates unchanged at a meeting of its policy-setting committee on Wednesday. The call, which was widely expected, keeps the target range for the federal-funds rate at 5.25%-5.50%.

The Federal Open Market Committee has kept rates steady for the past four consecutive meetings, with the last increase in July 2023.

That is in line with the strategy policymakers outlined last year of holding rates higher for longer in an effort to bring inflation back to the bank’s 2% target rate, ideally without causing an economic downturn.

In an effort to tame soaring, pandemic-era inflation, the central bank implemented 11 rate hikes starting in March 2022, seeking to rein in price pressures by limiting demand for goods and services. But now, core inflation, which excludes the more volatile food and energy prices, has registered a 2% annualized rate for the second quarter in a row, prompting both Fed officials and investors to question when rate cuts could be appropriate.

In economic projections released in December, Fed officials indicated they see three cuts of a quarter of a percentage point in the mix this year. Several Fed policymakers indicated in recent comments ahead of this week’s FOMC meeting that while the exact timing of rate cuts is still uncertain, they expect to ease monetary policy in the second half of 2024.

Yet with the U.S. economy still showing signs of resilience, cutting rates too aggressively poses a risk of stalling the decline in price growth, or even reigniting inflation. And if the Fed keeps policy too tight for too long, it could push the U.S. economy into a recession.

The need to balance those risks is why many Fed officials have said they want to proceed with caution.