In a closely-watched decision, the Federal Reserve announced on Wednesday that it would maintain its benchmark overnight borrowing rate within a range of 5.25% to 5.5%. This decision comes after a two-day policy meeting held by the central bank's rate-setting Federal Open Market Committee (FOMC).

The FOMC also revealed its projections for the future, indicating that three quarter-percentage point cuts may be implemented by the end of 2024. If implemented, these cuts would be the first reductions since the early days of the Covid-19 pandemic in March 2020.

Currently, the federal funds rate level stands as the highest in over 23 years. This rate directly affects the interest banks charge each other for overnight lending, making it influential in various forms of consumer debt.

The Fed's "dot plot," a matrix of anonymous projections from the 19 officials comprising the FOMC, offers insight into the outlook for future cuts. While it does not provide any indications about the timing of these reductions, Fed Chair Jerome Powell expressed confidence that the cuts would come as long as the data supports such a move.

Futures markets have already priced in a nearly 75% probability of the first cut occurring at the June 11-12 meeting, according to the CME Group's FedWatch gauge.

During a post-meeting news conference, Powell stated, "We believe that our policy rate is likely at its peak for this type of cycle, and that if the economy evolves broadly as expected, it will likely be appropriate to begin dialing back policy restraint at some point this year."

The "dot plot" projections also revealed three cuts in 2025, which is one fewer than previously projected in December. The FOMC expects three more reductions in 2026, with the final fed funds rate settling at around 2.6% - a rate deemed to be the "neutral rate" that neither stimulates nor restricts the economy.

The market response to the FOMC decision was positive, with the Dow Jones Industrial Average rallying to finish the session up 401 points or over 1%. Treasury yields also headed primarily lower.

In terms of economic projections, Fed officials have significantly increased their GDP growth estimate for this year to a 2.1% annualized rate, up from the previous estimate of 1.4% in December. The unemployment rate is anticipated to dip slightly to 4%, while core inflation as measured by personal consumption expenditures is projected to reach 2.6%.

The decision to keep rates steady was unanimously approved by the FOMC. Market analysis suggests that investors are likely to continue pushing stock prices higher until new factors halt the current upward momentum.

The Federal Reserve's patient and data-driven approach follows recent developments, including higher-than-expected inflation data, which has led top officials to exercise caution when considering rate cuts. With the economy still growing and unemployment remaining low, the Fed believes a more measured approach to monetary policy is appropriate.

Looking ahead, the expectation is for the first rate cut to take place in June, followed by two additional cuts. Additionally, market participants are eagerly awaiting further clarity on the Fed's balance sheet reduction program, which is expected to be addressed in the near future.

While no decisions were made during the meeting, Powell confirmed discussions surrounding the extent and timing of potential balance sheet reductions. The overall sentiment among committee members is that it will soon be appropriate to slow the pace of runoff, consistent with previously announced plans.

Overall, the Federal Reserve is signaling its intention to potentially implement rate cuts in the coming months, taking a cautious approach while closely monitoring economic data and market conditions.