Federal Reserve Chairman Jerome Powell speaks during a press conference in Washington, DC on March 20, 2024. Following the Federal Open Market Committee meeting, Chairman Powell announced that the Fed will keep interest rates on hold but may cut rates three times later this year. Chip Somodevilla/Getty Images Hide caption
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Chip Somodevilla/Getty Images
The Federal Reserve kept interest rates unchanged on Wednesday but policymakers still signaled they plan to start cutting rates later this year.
The latest projections from members of the Federal Reserve's interest rate-setting committee call for an average of three quarter-point rate cuts in 2024, similar to what policymakers predicted in December.
Investors cheered the news, sending all the major stock indexes to record highs, including the Dow Jones Industrial Average, which rose 401 points, or 1 percent.
Fed policymakers said that while inflation came in slightly stronger than expected in January and February, the fundamental outlook remained unchanged.
“I don't think we really know whether this is just a snag or something more,” Fed Chairman Jerome Powell told reporters. “We'll see. In the meantime, the economy is doing well. The labor market is doing well. Inflation is down substantially. So we can approach this issue with caution.”
Markets believe that a rate cut is unlikely at the next Fed meeting in May, with a June cut being more likely.
Since last summer, the Fed has kept interest rates at their highest levels in more than 20 years to stave off demand and control prices.
Committee members voted unanimously on Wednesday to keep interest rates steady at 5.25 percent to 5.5 percent. “The Committee does not believe it would be appropriate to lower the target range until it has greater confidence that inflation is moving sustainably toward 2 percent,” the Fed said in a statement.
So far, the economy has weathered high interest rates in relatively good shape. The unemployment rate has remained below 4% for more than two years. Employers have added an average of 265,000 jobs over the past three months.
But rising interest rates are hurting the housing market: Existing home sales fell 19% last year to the lowest level since 1995. The average rate on a 30-year mortgage was 6.74% last week, down from a peak of nearly 8% in October, according to Freddie Mac.
Retail sales have also slowed in recent months, signaling that some consumers are struggling with rising prices and high borrowing costs. Credit-card debt topped $1.1 trillion last year, and the number of cardholders who are behind on their payments is now above pre-pandemic levels, according to the Federal Reserve Bank of New York.