The Federal Reserve kept interest rates status quo but has signaled that borrowing costs likely will increase by another half of a percentage point by year’s end.
“Holding the target (interest rate) range steady at this meeting allows the committee to assess additional information and its implications for monetary policy,” said the Federal Open Market Committee in a unanimous policy statement.
Further rate increases will consider “the cumulative tightening of monetary policy, the lags with which monetary policy affects economic activity and inflation, and economic and financial developments," the committee reported.
Federal Reserve rate hikes could cause elevated borrowing costs for consumers who require new or used auto loans and other types of credit. Higher rates can also affect the housing and construction markets, key drivers of light-truck demand.
Policymakers at the median predict the benchmark overnight interest rate will rise from the current 5.00-5.25% range to a 5.50-5.75% range by year’s end. One official sees the rate rising above 6%, while two officials expect rates to stay where they are and four see a single additional quarter-percentage-point increase.
Two Fed officials see rates staying where they are, and four see a single additional quarter-percentage-point increase as likely appropriate.
Policymakers, however, see 100 basis points of rate cuts in 2024, alongside fast-falling inflation, reported Automotive News.
All things considered, many investors expect quarter-percentage-point rate increases to start anew at the next policy meeting in July. An improved view of the economy and slower progress in returning inflation to the central bank's 2% target are among the reasons for this outlook.
The economy's strength will cause inflation to decrease at a slower pace, with the core Personal Consumption Expenditures Price Index falling to 3.9% by the end of the year, as opposed to the March policymaker projections of a 3.6% year-end rate.
Originally posted on Auto Dealer Today