The Federal Reserve held interest rates steady Wednesday for the fourth-straight meeting, keeping its benchmark lending rate at a 23-year high, as Wall Street eagerly awaits rate cuts sometime this year.
The central bank has raised rates 11 times since March 2022 in a bid to combat the fastest inflation in decades. Price hikes have eased substantially since then, inching closer to the Fed’s 2% target. That means the Fed is due to cut rates in 2024, which officials themselves projected last month, but the central bank’s latest policy statement released Wednesday pushed back on expectations of the first rate cut coming in March.
“The Committee does not expect it will be appropriate to reduce the target range for the federal funds rate until it has gained greater confidence that inflation is moving sustainably toward 2 percent,” the statement read.
That’s the Fed’s latest attempt at giving Wall Street a reality check on rate cuts.
When will rate cutting start?
Fed officials have been communicating that sentiment for weeks now, and Wednesday’s statement is yet another signal from the Fed that investors need to rethink their bets. Wall Street has slowly come to grips with the Fed’s guidance. In early January, futures showed that rate cuts were very likely going to happen in March, but those odds have since crumbled, and they may continue to dip.
Generally, a rapidly weakening economy threatening job losses is an obvious reason why the Fed would begin to cut rates, but the economy remains in good shape with unemployment low and economic growth in positive territory. Inflation also hasn’t reached the Fed’s 2% target just yet and the latest policy statement kept a usual phrase stating that it “remains elevated.”