Fed maintains interest rate; “lack of progress” towards inflation goal

Washington. The US Federal Reserve held interest rates steady on Wednesday and signaled that it remains leaning towards an eventual reduction in borrowing costs, but warned about recent disappointing inflation readings and suggested possible stagnation in the move towards higher balance in the economy.

The Federal Reserve’s latest policy statement, issued at the end of a two-day meeting, kept key elements of its economic assessment and guidance intact, noting that “inflation has declined” over the past year, and framing its interest rate debate around the conditions under which borrowing costs can be reduced.

“The (Federal Open Market Committee) does not expect it to be appropriate to reduce the target range until it has gained greater confidence that inflation is moving sustainably toward 2 percent,” the Fed repeated in a statement approved unanimously. , in which he continued to indicate that the next movement in rates will be downward.

That still leaves the timing of any rate cut in question, and Fed officials stressed their concern that the first few months of 2024 have done little to generate the confidence they seek in lower inflation.

“In recent months, there has been a lack of further progress toward the Committee’s 2 percent inflation target,” the Fed said in the statement, while in the previous one it had suggested an improvement in dynamics, stating that the risks to the economy “are moving toward a better balance.” The new statement hints that the process may have stalled with its assessment that risks “have moved toward a better balance over the past year.”

The official reference interest rate has remained in the current range of 5.25-5.50 percent since July. Rate cuts were anticipated as early as March of this year, but have been delayed as inflation data showed that the path to the 2 percent target had stalled. The personal consumption expenditures price index, the Fed’s preferred inflation indicator, rose 2.7% in March year-on-year.

“Inflation remains high,” the Fed statement said, repeating a phrase that many analysts believe will likely have to be eliminated before an initial rate cut.

Fed Chairman Jerome Powell will hold a press conference at 2:30 p.m. local time (6:30 p.m. GMT) to provide more details on the outcome of the monetary policy meeting and answer questions.