US | The Fed sticks to its plan for three rate cuts this year

Summary

The Fed appears to have achieved a better balance of risks around its dual mandate of price stability and maximum employment. This suggests that it will soon begin to normalize its policy stance, probably in June, although it will proceed cautiously even after that.

Key points

• Key points:
• The FOMC kept the fed funds rate unchanged at 5.25-5.50% and suggested they remain relatively confident around the disinflationary process.
• The updated SEP and dot-plot show that the Fed still expects three rate cuts this year despite faster short-term growth and somewhat higher core inflation.
• Powell signaled there’s no compelling reason to start cutting rates too soon but also that the Fed still thinks it will need to start easing back policy restraint this year.
• Markets welcomed the Fed sticking to its plan after a few weeks of uncertainty around the possible reaction of FOMC participants to recent core inflation prints.
• Today’s statement suggest that the Fed still expects disinflation to run its course this year, but for now it remains in wait-and-see mode.

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