Federal Reserve leaders agreed on Wednesday to keep interest rates solid for the seventh consecutive meeting, indicating that they are willing to hold rates at their highest level in more than two years for longer than originally anticipated, and that efforts to lower inflation have stalled.
The central banks left its , standard federal money rate , constant in a selection between 5.25 percent and 5.5 percent, as it awaits more proof that inflation is effectively falling to its two percentage goal.
The Fed last increased the Fed’s funds rate in July, with Jerome Powell, the Fed’s chairman, saying it was too soon to determine whether inflation was cooling enough to halt further increases. The Fed’s projections at the following meeting in September suggested that it might increase rates once more before the year’s end.
That changed two meetings later in December when the Fed announced its intention to cut rates three times in 2024. Further expansion was anticipated, as did the market, which further increased.
The Fed attempted to dampen those expectations in January by stating that rate cuts were not imminent and that officials needed more convincing proof that inflation was returning to the Fed’s target. Despite maintaining rates at levels that Fed officials believe are high enough to restrain the economy, inflation re-ignited in the months that followed.
Personal consumption expenditures price index, the Fed’s preferred inflation gauge, increased at an annualized rate of 3.4 percent in the first quarter, nearly twice the rate of 1.8 percent that was recorded in the fourth quarter of last year. Core PCE inflation, which excludes the more volatile costs of food and energy, climbed 3.7 percent in the first three months of the year, a big step up from the fourth quarter’s 2 percent.
Wednesday’s statement acknowledged the upward thrust of inflation.
” Inflation has decreased over the past year, but it is still elevated. In recent months, there has been a lack of further progress toward the Committee’s 2 percent inflation objective”, the Fed said in its official statement following the two- day meeting of the Federal Open Market Committee, the central bank’s monetary policy board.
