Fed Projects Inflation to Stay High Longer, Slows Rate Cut Expectations

Federal Reserve officials capped 2024 with a third-straight interest-rate cut, signaling that inflation concerns have risen. Chairman Jerome Powell noted that the central bank's inflation projection for the year has “kind of fallen apart.” Officials now anticipate it will take longer for inflation to reach the 2% target, prompting a reduced outlook for rate cuts next year. The shift in focus has sparked market volatility, with U.S. Treasury markets and stocks tumbling while the U.S. dollar strengthened. Officials now project inflation to be higher than expected by the end of next year and don't anticipate reaching the 2% target until 2027.