The Federal Reserve scaled back its interest-rate projection for 2024, calling for just one 25-basis-point reduction, according to the U.S. central bank’s Summary of Economic Projections released on Wednesday. That’s down from the three cuts the Fed had penciled back in March.

The news comes after cooler-than-expected inflation data for May increased confidence that the Fed might start lowering borrowing costs sooner. However, policymakers have emphasized that they require several consecutive months of waning price pressures before contemplating rate cuts, particularly in light of the latest jobs report which has reignited the debate about the restrictiveness of current policy.

The rate projection comes from the Fed’s so-called dot plot, a closely scrutinized scatter chart of expectations on the path for interest rates, through which each of the 19 members of the policy-setting Federal Open Market Committee assign one dot for what they reckon is the midpoint of the federal funds rate’s range at the end of each of the next three years and over the longer run.

In all, the monetary authority is looking to hold rates higher for longer in the face of stubborn inflation pressures. May’s median projections indicated the benchmark lending rate will slip to 5.1% in 2024 from 5.4% in 2023, up from March’s 4.6% projection. The median forecast for 2025 also rose to 4.1% from 3.9% in March, while that of 2026 remained unchanged. The longer-run rate projection edged up to 2.8% from 2.6%.

Of the FOMC members, four see no rate cuts this year (up from two officials in March), seven see one cut, and eight see two cuts, the dot plot showed.

The hawkish dots come as officials upwardly revised their core PCE inflation projections. The Fed’s preferred inflation gauge is now expected to close out 2024 at 2.8% (up from 2.6% in March). From there, the measure is seen retreating to 2.3% (vs. 2.2% in March) in 2025 and 2.0% in 2026 (unchanged).

On the labor market, the Fed expects the unemployment rate to be 4.0% (unrevised) in 2024. But the median projections for 2025, 2026 and the longer term all were revised up to 4.2% (from 4.1%), 4.1% (from 4.0%) and 4.2% (from 4.1%), respectively.

Meantime, median projections for inflation-adjusted gross domestic product were maintained from March. Real output is expected to be 2.1% in 2024, followed by 2.0% in 2025 and 2026 and 1.8% in the longer run.

In conjunction with the release of the SEP, the Fed kept its benchmark policy rate unchanged for a seventh straight meeting, as expected, but policymakers acknowledged that there had been “modest further progress” towards their 2% inflation target.

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