Federal Reserve Maintains Interest Rates, Signals Possible Rate Cut

The Federal Reserve has decided to keep interest rates unchanged, voting 11-1 to maintain rates in the 3.50% to 3.75% range. This decision comes as the US economy grapples with persistent inflation, weakening labour demand, and an "uncertain" outlook due to the war in Iran.

Key Projections

• The Fed has revised its inflation outlook higher, projecting 2.7% inflation for the end of 2026.
• Headline personal consumption expenditures (PCE) inflation is now expected to reach 2.7%, up from 2.4%.
• Core inflation, excluding volatile components like food and fuel, is expected to rise to 2.7%, up from 2.5%.

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Economic Outlook

• The unemployment rate is projected to stay at 4.4% by year-end, unchanged from earlier forecasts.
• GDP growth is expected to reach 2.4% for the year, slightly higher than the 2.3% projected in December.
• The Fed has a dual mandate of maintaining inflation near 2% while ensuring maximum employment.