Top NewsThe US Fed pencils in an interest rate cut this year

The US Fed pencils in an interest rate cut this year

The US Federal Reserve has signaled it will cut its key interest rate only once this year, even as inflation eases.

In March, the central bank was expected to cut borrowing costs three times by the end of 2024.

However, on Wednesday, new forecasts from central bank officials that make decisions on rates were penciled in for a single cut.

The fresh outlook emerged after the central bank voted to keep interest rates at their current 23-year highs despite easing inflation.

Inflation, which measures the pace of price rises, eased to 3.3% in the year to May. This compares with 3.4% in the 12 months to April.

However, inflation remained unchanged between April and May and is above the central bank’s 2% target.

Federal Reserve Chairman Jerome Powell said only “modest” progress had been made toward the target and that the central bank would need to see “good inflation readings” before cutting interest rates.

US interest rates were at 5.25% – 5.5%.

Anastasia Fedick, assistant professor of finance at the Haas Business School at the University of California, Berkeley, told the BBC’s Today programme: “We’ve got some good news in terms of better inflation numbers.

“But the central bank is still very cautious, so they’re signaling that they’re going to do something in the near future, most likely, a rate cut and it’s not going to be huge.”

Some analysts suggested the central bank would scale back the number of interest rate cuts this year.

Ian Shepherdson, chief economist at Pantheon Macroeconomics, said it was “unnecessarily aggressive” to cut forecasts for a three-to-one rate cut this year.

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Economists at Wells Fargo called it a “close call” between one or two cuts in 2024.

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