LIVE Update: Federal Reserve Interest Rate Prediction Apr. 30

The Federal Reserve interest rate, known as the federal funds rate, fed funds rate, or FOMC rate, is the interest rate at which banks and credit unions borrow from and lend to each other, and is the benchmark for nearly all interest rates. It’s determined by the Federal Reserveand can be changed at any time.

Prediction for the upcoming April 30 – May 1 Federal Reserve meeting

The Federal Reserve is scheduled to meet on April 30 and May 1 for its third meeting of 2024. And the big question is: What will the central bank do with its benchmark interest rate?

At its first two meetings of 2024, the Fed held interest rates steady. And at this point, the Fed is likely done raising interest rates barring a really wild uptick in inflation. But when will the central bank start cutting interest rates?

The answer is, probably not at its upcoming meeting. In fact, there’s a good chance rate cuts won’t happen until the second half of 2024.

In March, the Consumer Price Index (CPI), which measures changes in the cost of consumer goods and services, was up 3.5% on an annual basis. On a month-to-month basis, the index was up 0.4% from February.

The problem, though, is that March’s annual inflation reading was higher than February’s 3.2% increase. This means that inflation is going in the wrong direction. And because of this, the Fed is unlikely to respond with a rate cut.

The Fed has long targeted an annual inflation rate of 2% over time. It’s this level, the Fed feels, that’s most conducive to economic growth and stability.

Now the Fed may have to start cutting interest rates before inflation reaches that 2% target. But with a CPI reading of 3.5%, a May rate cut seems very unlikely.

In mid-April, Federal Reserve Chair Jerome Powell was quoted as saying, “The recent data have clearly not given us greater confidence and instead indicate that it’s likely to take longer than expected to achieve {2% inflation}.” In light of this, the Fed may very well hold its benchmark interest rate steady next week.

Interest rates hold steady following the March 19-20 Federal Reserve meeting

The Federal Reserve has opted to hold interest rates steady for the fifth meeting in a row. The target range for the federal funds rate will remain 5.25% to 5.5%.

Economists had anticipated a pause in interest rate hikes due to a number of factors, including cooling inflation. However, as the Fed stated in its post-meeting notes, “The Committee would be prepared to adjust the stance of monetary policy as appropriate if risks emerge that could impede the attainment of the Committee’s goals.”

Analysis of the Fed Mar. 19 – Mar. 20, 2024 meeting

The Federal Reserve made the decision to keep its benchmark interest rate unchanged at its March policy meeting. The central bank raised interest rates 11 times between March of 2022 and July of 2023.

The Fed has long been committed to an annual inflation rate of 2% in the long run. It’s this rate, the central bank feels, that’s most conducive to economic stability.

In February, the Consumer Price Index, which measures changes in the cost of consumer goods and services, rose 3.2% on an annual basis.

The Fed noted in its meeting statement that inflation has eased but remains elevated. It also affirmed its intent to restore annual inflation to 2% over time.

In its statement, the Fed said, “The Committee seeks to achieve maximum employment and inflation at the rate of 2 percent over the longer run. The Committee judges that the risks to achieving its employment and inflation goals are moving into better balance. The economic outlook is uncertain, and the Committee remains highly attentive to inflation risks.”

The Fed also made it clear that it’s open to additional interest rate hikes should inflation rise or get stuck at a level above the Fed’s target.

The Fed needs to strike a balance between bringing inflation back down to 2% and potentially upending the economy by driving up the cost of consumer borrowing to an unreasonable degree. Given the narrowing gap between inflation and its 2% target, this fifth pause in rate hikes seems reasonable.

The Fed also signaled that three rate cuts could be coming this year. But for that to happen, inflation will need to continue cooling.

Changes to the federal funds rate impact consumers because they can influence the interest rates on credit cards, loans, and savings accounts to varying degrees.

When is the next Fed rate hike?

The Federal Reserve’s next meeting is scheduled for Apr. 30 – May 1, 2024. The Fed is likely done raising interest rates at this point. Soon, the central bank will have to contemplate whether it’s ready to start cutting interest rates.