MNI: Fed Holds Rates, Cites Lack Of Inflation Progress

The Federal Reserve kept interest rates on hold for a sixth meeting in a row Wednesday and noted a lack of improvement in recent inflation numbers, suggesting policymakers are in no rush to begin lowering interest rates.

"In recent months, there has been a lack of further progress toward the committee’s 2% inflation objective," the Fed said in its post-meeting statement.

Officials also unveiled plans to reduce the pace of balance sheet reduction starting in June, lowering the cap on Treasuries allowed to run off the portfolio to USD25 billion a month but maintaining the pace of agency mortgage-backed securities at a maximum of USD35 billion.

Expectations for Fed rate cuts have receded sharply in recent weeks to just a single reduction later in the year after a string of hotter-than-expected inflation readings raised fears price pressures are plateauing above the Fed's target.

As recently as its March meeting, the FOMC had penciled in three rate cuts for 2024.

At his post-meeting press conference, Fed Chair Jerome Powell will face questions about whether the Fed will hike rates at all this year -- and even whether the possibility of a rate hike might be back on the table.

GREATER CONFIDENCE

The FOMC said risks to achieving its employment inflation goals "have moved toward better balance over the past year," after saying the risks were "moving into" better balance at its last meeting.

But it also repeated that it seeks “greater confidence inflation is moving sustainably toward 2%” before cutting interest rates.

The Fed's preferred inflation gauge, the PCE, climbed to 2.7% in the year to March from 2.5% in the two prior months.

Strong employment and robust growth are also seen as lessening any imperative to reduce borrowing costs.

The economy expanded at an annual rate of 1.6% in the first three months of this year after a blistering second half of 2023, and underlying growth momentum remains strong. Friday’s employment report is expected to show the economy generated another 250,000 new jobs in April.