The Fed’s next decision will likely mean Americans are going to wait a lot longer for any interest rate cuts

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Federal Reserve Bank Chair Jerome Powell announces that interest rates will remain unchanged during a news conference at the bank’s William McChesney Martin building on May 01, 2024 in Washington, DC.

The Federal Reserve is likely to hold interest rates steady in its next decision on Wednesday.
It follows a strong jobs report and still-high inflation.
It’ll likely take longer for the Fed to cut interest rates given recent economic data.

Americans shouldn’t expect interest rate cuts to head their way anytime soon.

The Federal Open Market Committee will announce its next interest rate decision on Wednesday, and following a hot jobs report , there’s a strong chance rates will once again remain steady. According to the CME FedWatch Tool , which estimates the likelihood the Federal Reserve will change interest rates based on market predictions, there’s a 99.4% chance rates will stay where they are as of Monday.

While the FOMC forecast three interest rate cuts this year in its December projections, Fed Chair Jerome Powell has reiterated throughout the year that nothing is set in stone, and the nation’s central bank is willing to hold out as long as necessary until it feels confident the economy has cooled down enough.

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“The first quarter in the United States was notable for its lack of further progress on inflation,” Powell said during a panel in Amsterdam in May .

“We did not expect this to be a smooth road, but these were higher than I think anybody expected,” Powell added. “What that has told us is that we’ll need to be patient and let restrictive policy do its work.”

The Consumer Price Index increased 3.4% for the 12 months ending April, which means it’s still elevated. The next CPI report will be published on Wednesday morning. And the US labor market saw some strength in May — the US economy added 272,000 jobs that month, which was way above economists’ expectations .

“We have a very interesting labor market,” Julia Pollak, the chief economist for ZipRecruiter, told Business Insider. “It’s not the old normal. It’s the new normal where employers are slower to fire, slower to hire, and workers are slower to switch jobs. That could be both a good thing and a bad thing.

“It may be bad, partly, because it is driven in part by uncertainty and fear and high interest rates holding back activity,” Pollak added. “But, it’s good in other ways because some of it has to do with the fact that jobs got better during the pandemic.”

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The unemployment rate also ticked up to 4.0% in May; the last time it was this rate was back in January 2022. Nick Bunker, the economic research director for North America at the Indeed Hiring Lab, said May’s rate is “still quite low historically.”

Still, Joseph Briggs, an economist at Goldman Sachs, told Business Insider that while rate cuts “have been delayed somewhat by the stickier Q1 inflation, we do think that we’re still on track two this year starting in September.”

Powell previously outlined what it would take to cut rates. During May’s press conference following the FOMC’s decision to hold rates steady, Powell said there are two paths that would give the Fed enough confidence to cut rates: more data to show inflation is getting closer to the Fed’s 2% target or an “unexpected weakening in the labor market.”


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