BREAKING NEWS: Fed Keeps Funds Rate at Current Level, Signals One Cut by Year’s End

The Federal Reserve’s Federal Open Market Committee voted unanimously at its June meeting to maintain the benchmark federal funds rate within a range of 5.25% to 5.5%. The widely expected vote followed Wednesday’s report that inflation eased slightly in May. 

Although futures markets on Wednesday priced in a roughly 70% likelihood of at least two rate cuts by the end of 2024, per CME Group data, the FOMC’s latest “dot plot” of rate cuts expectations suggested that we’ll see just one quarter-point reduction this year. Four committee members favored making no cuts this year, up from two at the March meeting. 

The Bureau of Labor Statistics reported earlier on Wednesday that the Consumer Price Index for May was unchanged from the previous month but rose 3.3% from a year earlier. Economists surveyed by Dow Jones had predicted a 0.1% monthly increase and a 3.4% annual rate, according to CNBC. The shelter index rose 0.4% from April, more than offsetting a decline in the price of gasoline, the BLS said. 

The slight softening of inflation precipitated a slight change in the FOMC statement’s language around this metric. “Inflation has eased over the past year but remains elevated,” according to the statement. “In recent months, there has been modest further progress toward the Committee’s 2% inflation objective.” Earlier this year, the statement expressed the FOMC’s view that progress had stalled. 

That said, the “dot plot” released Wednesday did point to a more aggressive stance on rate-cutting in 2025. The FOMC currently anticipates making four quarter-point cuts next year, thereby bringing the federal funds rate down by 1.25 percentage points from its current level.