Fed rate-cut debate shifts from 'when' to 'if' on inflation data

The debate for the Federal Reserve is beginning to shift from how many times to cut interest rates this year to whether to cut them at all in 2024.

Policymakers are widely expected to hold rates steady at a more than two-decade high at the conclusion of their meeting Wednesday, so much of the focus will be on any pivot in the tone of the post-meeting statement and Chair Jerome Powell's press conference.

Officials are also expected to announce a near-term slowing in the reduction of the Fed's $7.4 trillion balance sheet - a move that's independent from any decision on interest-rate timing. Policymakers have voiced the need for a cautious approach to further runoff, hoping to avoid market turmoil.


Following worse-than-hoped inflation reports during the first three months of the year, Powell said that it would likely take "longer than expected" to become confident inflation is moving toward the central bank's 2% target. The central bank, he added, can keep rates high "as long as needed." While the Fed leadership has suggested a delay for rate reductions, it's starting to look like a real possibility policymakers may not cut at all this year.

Powell's colleagues on the Federal Open Market Committee see no urgency to lower rates. Governor Michelle Bowman said she sees "upside risks" to inflation, and Minneapolis Fed President Neel Kashkari floated the possibility of no rate cuts this year.