Fed officials sharply reduced the number of rate cuts they expect this year, indicating that they now expect just a single rate cut this year, projections released Wednesday showed.
The change suggests that the Federal Reserve is likely to hold its interest rate higher for longer than previously anticipated, likely not cutting until after election day.
The median expectation for the Fed’s benchmark interest rate by year-end rose to 5.1 percent from 4.6 percent, implying that the Fed sees just one rate cut from the current range of 5.25 to 5.50 percent. The earlier projections had implied three cuts this year.
Wall Street had expected a smaller pullback from cuts, forecasting Fed officials would pencil in two cuts for this year.
Officials also see inflation running hotter than they did earlier this year. When the Fed last released the economic projections of its officials, the median expectation was for the personal consumption expenditure price index to rise 2.4 percent this year. In the new projections, the median expected rate of inflation rose to 2.6 percent. Core inflation is now seen as rising 2.8 percent, up from 2.6 percent in March.
