The U.S. Federal Reserve signaled on Wednesday that it would cut interest rates two more times this year after cutting its benchmark federal funds rate by 50 basis points to a range of 4.75 to 5.0 percent at the end of its meeting on Wednesday.

Fed officials expect the benchmark interest rate to fall to 4.4% in 2024, suggesting the Fed will cut rates by another 0.50% later this year. Aside from Wednesday’s massive 50 basis point cut, the Fed has cut rates in 25 basis point increments over the past year, suggesting the central bank expects two more rate cuts in 2024. The previous forecast in June called for a high of 5.1%.

At the same time as its monetary policy announcement, the Fed released updated economic forecasts in its Summary of Economic Projections (SEP), including its “dot plot,” which shows policymakers’ expectations regarding the future path of interest rates.

A total of 17 experts are forecasting further interest rate cuts for this year, only two expect interest rates to remain stable for the rest of the year. Seven experts are only expecting one further cut, nine experts are expecting two further cuts. One expert is forecasting three further cuts by the end of the year.

Next year, the majority of experts expect the key interest rate to reach 3.4%, lower than the 4.1% expected in their previous forecast. This suggests that four more rate cuts are on the horizon in 2025. After that, experts expect two more cuts in 2026, which would bring the key interest rate down to 2.9%.

The updated forecasts suggest that the Federal Reserve has begun its long-awaited easing cycle. The central bank is trying to bring about a soft landing for the economy in which price increases stabilize and employment remains robust.

Inflation has eased so far this year, but is still above the US Federal Reserve’s two percent target on an annual basis. The pressure is due to higher-than-expected monthly core price readings in recent months.

The labor market was also in the Fed’s focus after the unemployment rate unexpectedly rose to 4.3% in July. It has since fallen to 4.2%, while FOMC members debate whether the labor market’s recent weakness is a sign that the market is gradually cooling or weakening quickly.

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