US Fed indicates just one rate cut expected for remainder of 2024

By Ovunc Kutlu

ISTANBUL (AA) - The US Federal Reserve signaled it expects just one interest rate cut this year, as the central bank raised its terminal rate estimate to 5.1%, according to projections materials released Wednesday.

The terminal rate, the peak spot where the federal funds rate is expected to climb before being trimmed, stood at 4.6% in the Fed's projections made in March.

The new projections came as the Fed kept its federal funds rate unchanged in the 5.25%-5.5% target range, as widely expected, which is the highest level in 23 years.

This means the bank can lower interest rates just one time by 25 basis points in the remainder of this year -- in July, September, November, or December.

The Fed also anticipates a total of four additional rate cuts in 2025, by 25 basis points each, which is down from five that was estimated in March projections.

American economy's growth projections for 2024 and 2025 were kept unchanged at 2.1% and 2%, respectively.

The personal consumption expenditures (PCE) price index, the central bank's preferred inflation indicator, however, was raised to 2.6% for 2024 up from 2.4% in March estimates.

Core PCE inflation was also revised up to 2.8% for 2024, from the 2.6% forecast made three months ago.

The unemployment rate is estimated at 4% this year, unchanged from the previous forecast, and expected to rise to 4.2% next year, slightly up from the previous estimate of 4.1%.