The US Federal Reserve has signalled that it will cut its key interest rate just once this year despite inflation easing.
Back in March, the central bank had been expected to reduce borrowing costs three times by the end of 2024.
However, on Wednesday, new forecasts from Fed officials who make decisions on rates pencilled in a single reduction.
The new outlook emerged after the Fed voted to hold interest rates at their current 23-year high even as inflation ticked lower.
Inflation, which measures the pace of price rises, slowed to 3.3% in the year to May. That compares with 3.4% in the 12 months to April.
However, between April and May inflation was unchanged and it remains above the Fed’s 2% target.
Jerome Powell, chair of the Federal Reserve, said that only “modest” progress had been made on hitting the target and the central bank would need to see “good inflation readings” before interest rates can be cut.
US interest rates were held at 5.25%-5.5%.
Anastassia Fedyk, assistant professor of finance at Haas Business School at the University of California Berkeley, told the BBC’s Today programme: “We did get some good news in terms of better inflation numbers.
“But the Fed is still being pretty cautious so they are signalling that in the future they are going to be doing one, most likely, rate drop and not a very large one at that.”
Some analysts suggested that the central bank would backtrack on the number of interest rate cuts this year.
Ian Shepherdson, chief economist at Pantheon Macroeconomics, said that reducing forecasts of interest rate cuts from three to one this year was “unnecessarily aggressive”.
While economists at Wells Fargo said it would be a “close call” between making one or two reductions in 2024.
Officials at the US Fed were split over how many interest rate cuts they expected this year. Of the 19 policymakers who gave their outlook, four expected no cut, seven forecasted one reduction while eight thought there would be two.
