Fed Meeting Today: FOMC Pauses Rate Hikes and Signals More Increases Later This Year (2024)

Today's Fed Meeting

A breather—simply keeping rates where they are—gives the central bank more time to monitor the effects of its fight against inflation.

The central bank also signaled it may need to take rates higher this year, with half of the committee expecting rates to increase by another half-point.

News and analysis from the June meeting:

Federal Reserve Chair Jerome Powell called out a lack of progress on bringing down rental costs on Wednesday. “You're just not seeing a lot of progress, not the kind of progress we want to see,” he said.

Although experts have forecasted a slowdown in rent increases, little progress has been recorded so far in the consumer price index. Annual rent inflation stood at 8.7% in May, while shelter costs overall were up 8% year over year. The rise in housing costs accounted for more than 60% of the total increase in core CPI in May.

“As a factual matter, we do need to see rents bottomed out here—or at least stay quite low in terms of their increases because we want inflation to come down and rental [costs] is a very large part of the CPI, about a third,” Powell said. “It's about half of that for the PCE, so it's important. It's something that we're watching very carefully.”

The PCE is an index of personal-consumption expenditures. Core PC, which excludes food and energy, is the bank’s preferred measure of inflation.

"The median participant [in the FOMC] now thinks that core PCE inflation on a 12 month basis will be 3.9% this year, Powell said. “So once again, every year for the past three years, it's gone up over the course of the year, and that's doing that again."

That is a signal that policy makers need to do more, the chairman said.

Traders are already bracing for the Federal Reserve to unpause its rate-hike campaign.

Futures markets are predicting a roughly 70% chance of a rate increase at the Fed's July 25-26 meeting, according to the CME FedWatch Tool. The central bank kept rates steady at today's meeting, but signaled that it may need to lift rates higher this year.

During Jerome Powell's news conference, the chairman said the choice to pause was for this meeting alone and officials haven't made any decisions about rate increases at future meetings.

"We didn't make a decision about July," Powell said. "Of course, it came up in the meeting from time to time, but really the focus was on what to do today."

Powell added: "I would say about July two things: One, a decision hasn't been made. Two: I do expect that it will be a live meeting."

There are no rate cuts on the horizon.

"Not a single person on the committee wrote down a rate cut this year, nor do I think it is at all likely to be appropriate if you think about it,” Federal Reserve Chair Jerome Powell said, referring to policy makers’ projections of where rates are headed. “Inflation has not really moved down—it has not so far reacted much to our existing rate hikes.”

Although forecasts show inflation declining over the next couple of years, Powell said these predictions are “highly uncertain” at this stage. “Getting price stability back and restored will benefit generations of people—as long as it's sustained. It really is the bedrock of the economy and you should understand that that is our top priority.”

The CME FedWatch Tool currently puts the odds of a rate cut in December at 10%.