The Federal Reserve kept the main interest rate unchanged following its meeting on Wednesday — a move that was widely anticipated.
The Federal Reserve kept interest rates unchanged following its meeting on Wednesday — a move that was widely anticipated as the central bank cautioned that it “does not expect it will be appropriate” to slash rates “until it has gained greater confidence that inflation is moving sustainably toward 2%.”
The central bankers signaled that they still anticipate three rate cuts this year, with investors betting the first 25 basis point cut will come in June.
Two weeks ago, Fed Chair Jerome Powell suggested that the central bank was “not far” from gaining the confidence it needed that inflation was headed sustainably toward its 2% target level, which would allow it to start cutting its benchmark interest rate.
It was a tantalizing suggestion, because a cut in the Fed’s key rate has typically boosted the economy by reducing the cost of lending, from mortgages to business loans.
It might also benefit President Joe Biden’s re-election bid, which is facing widespread public unhappiness over price levels across the economy.
Since then, though, the latest inflation measures have turned out to be hotter than expected: A government report showed that consumer prices jumped from January to February by much more than is consistent with the Fed’s target.
A second report showed that wholesale inflation also came in surprisingly high — a possible sign of inflation pressures in the pipeline that could cause consumer price increases to stay elevated in the coming months.
A key question for Powell and the 18 other officials on the Fed’s interest-rate-setting committee is how — or whether — those figures have altered their timetable for cutting rates.
