Federal Reserve officials capped their first monetary policy meeting of 2024 by leaving the central bank’s benchmark interest rate unchanged, a decision that was widely expected on Wall Street. But policy makers signaled they expect to cut rates later this year, heightening investor focus on exactly when the Fed might release the brakes on the U.S. economy for the first time in two years. 

Members of the Federal Open Market Committee, the Fed’s rate-setting panel, said Wednesday in a policy statement that they will hold the federal funds rate in a range of 5.25% to 5.5%, marking the fourth consecutive pause since July, when it last hiked rates. In December, the central bank forecast three rate hikes this year. 

“The committee does not expect it will be appropriate to reduce the target range until it has gained greater confidence that inflation is moving sustainably toward 2%,” the central bank said in its statement.

The Fed started boosting rates in March of 2021 in a bid to temper the hottest inflation in four decades. That policy is paying off as consumer prices cool and as the overall U.S. economy remains strong, with low unemployment and robust GDP growth. 

“As the incoming economic data make clear, there is little reason for the Fed to act quickly,” noted Michael Pearce, lead U.S. economist at Oxford Economics, told investors in a January 26 report. “While inflation continues to quickly normalize, the Fed can be patient in moving toward rate cuts because of the resilience of the real economy.”

About 4 in 10 Wall Street economists are now projecting that the Fed will move to cut rates in March, with its next rate meeting set for March 19-20, according to financial data provider FactSet. About 9 in 10 economists are penciling in a rate cut at the central bank’s following meeting, scheduled for April 30-May 1. 

The Fed’s flurry of rate hikes since the pandemic slammed the economy has made it more expensive for consumers and businesses to borrow, ratcheting up the cost of mortgages, car loans and and credit card debt. Rate cuts could provide some relief to Americans who have put off home or car purchases due to the higher cost of borrowing. 

But experts warn that a premature move to cut rates could open the door to renewed inflation.