Federal Reserve Expects to Lower Interest Rates Later This Year

We believe that our policy rate is likely at its peak for this tightening cycle. If the economy evolves broadly as expected, it will likely be appropriate to begin dialing back policy restraint at some point this year. But the economic outlook is uncertain, and ongoing progress toward our 2 percent objective for inflation is not assured. Reducing policy restraint too soon or too much could result in a reversal of progress we’ve seen in inflation, and ultimately require even tighter policy to get inflation back to 2 percent. At the same time, reducing policy restraint too late or too little could unduly weaken economic activity and employment. While inflation remains above the FOMC’s objective of 2 percent, it has eased substantially and the slowing in inflation has occurred without a significant increase in unemployment. The labor market remains relatively tight, but supply-and-demand conditions have continued to come into better balance. In considering any adjustments to the target range for the policy rate, we will carefully assess the incoming data, the evolving outlook and the balance of risks. The committee does not expect that it will be appropriate to reduce the target range until it has gained greater confidence that inflation is moving sustainably toward 2 percent.