The U.S. Federal Reserve kept its prime interest rate at a 23-year high on Wednesday, signalling continued monetary policy divergence from Canada.

The Fed’s Federal Open Market Committee voted unanimously to hold the federal funds rate in a target range of 5.25% to 5.5%. The FOMC includes Fed chief Jerome Powell and regional reserve bank presidents.

The Fed signalled that just one cut will occur this year. On Wednesday, futures markets priced in a roughly 70% likelihood of at least two rate cuts by the end of 2024.

But according to CME Group data, the FOMC’s latest dot plot, a forecasting system of rate cuts expectations, suggested, that the country will just a single 25-basis-boint reduction this year.

The dot plot is a collection of economic and labour market forecasts provided by the Fed;s seven governors and 12 regional federal reserve bank presidents that sit on the FOMC.

Four committee members favoured making no cuts this year, up from two at the March meeting. 

The decision to hold came after the Bank of Canada recently reduced its key overnight rate to 4.75% from 5% in a long-awaited move. “gained greater confidence that inflation is moving sustainably” 

The Fed’s stance on cuts could spell a wider divergence rate-wise from the BoC, which has signalled that it will make more than one cut in 2024. The U.S. central bank said in a news release that it does not want to make more cuts until it has “gained greater confidence that inflation is moving sustainably.”

The BoC’s governor, Tiff Macklem, has also stressed a need to reduce inflation to the 2% range. But the Canadian central bank has become more comfortable with the idea of interest-rate reductions than the Fed, which has contemplated raising interest rates, according previous reports.

The Fed’s hold came after U.S. consumer forecasts for inflation and home prices increased while assessments of the labour market weakened in April, according to a report by the Federal Reserve Bank of New York. 

Inflation expectations decreased to 2.8% from 2.9% three years from now but increased to 2.8% from 2.6% at the five-year horizon. 

The Fed last raised interest rates in July 2023.

With files from Paul Bubney and Joe Palmisano.