The Federal Open Market Committee announced today that it would once again leave the federal funds rate unchanged at 5.25%-5.5% and signaled that it may begin lowering the rate next year. The decision marked the fourth time this year that the committee has left the rate untouched.
In a news conference, Federal Reserve Chairman Jerome Powell cautioned that while inflation has eased over the past year, “we will need to see further evidence to build confidence that inflation is moving down sustainably toward our goal.” Still, the median projection for the appropriate level of the federal funds rate by FOMC participants was 4.6% at the end of 2024, 3.6% at the end of 2025 and 2.9% at the end of 2026, he said.
In terms of when FOMC could begin dialing back the rate, Powell said that the answer depends on several factors. “We are seeing strong growth that is that appears to be moderating,” he said. “We’re seeing a labor market that is coming back into balance by so many measures, and we’re seeing inflation making real progress. These are the things we’ve been wanting to see. We still have a ways to go. No one is declaring victory—that would be premature—and we can’t be guaranteed in this progress. So we’re moving carefully and making that assessment of whether we need to do more or not.”