(TheLastPatriotNews.com) – In an outright admission to the “lack of further progress” in its fight against inflation, the Federal Reserve opted to maintain current interest rates, withholding any cuts as it faces what is described as an increasingly challenging inflation scenario.
This decision was anticipated, as the U.S. central bank preserved its benchmark short-term borrowing rate within a range of 5.25%-5.50%, CNBC reports.
This rate has remained unchanged since July 2023 when the Fed escalated the rate to its highest in over two decades.
The Federal Open Market Committee voted to decelerate the reduction of bond holdings in the central bank’s substantial balance sheet, which signaled a subtle shift towards a more relaxed monetary policy stance.
It was in its statement after meeting that the committee acknowledged a “lack of further progress” towards reducing inflation to its target of 2%.
“The Committee does not expect it will be appropriate to reduce the target range until it has gained greater confidence that inflation is moving sustainably toward 2 percent,” the statement articulated.
It thus echoed sentiments from prior meetings in January and March.
Additionally, the statement modified its assessment of progress towards its dual mandate of stable prices and full employment, noting that the risks associated with achieving these goals “have moved toward better balance over the past year.”
Economic growth was described as robust, accompanied by significant employment gains and low unemployment rates.
Fed Chair Jerome Powell, in a subsequent press conference, emphasized the persisting issue of excessive inflation.
“Inflation is still too high. Further progress in bringing it down is not assured and the path forward is uncertain,” Powell stated.
His remarks also indicated that a rate hike was “unlikely” in the near future, a comment that led to a surge in the Dow Jones Industrial Average by as much as 500 points.
Powell underscored the necessity of taking policy decisions on a “meeting by meeting” basis.
Starting in June, the pace at which the Fed allows maturing bond proceeds to roll off without reinvestment will be slowed down.
This approach, known as “quantitative tightening,” initiated in June 2022, previously permitted up to $95 billion a month in maturing Treasurys and mortgage-backed securities to roll off.
Although inflation has decreased from its mid-2022 peak, recent data from 2024 indicates that it still significantly exceeds the Fed’s annual 2% target, with core measures suggesting a 2.7% annual rate.
Concurrently, GDP growth was a disappointing 1.6% on an annualized basis in the first quarter, which raises concerns about a potential stagflation scenario characterized by high inflation and sluggish growth.
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