WASHINGTON—The Federal Reserve on Wednesday emphasized that inflation has remained stubbornly high in recent months and said it doesn’t plan to cut interest rates until it has “greater confidence” that price increases are slowing sustainably to its 2 percent target.
Federal Reserve Board Chair Jerome Powell speaks during a news conference at the Federal Reserve in Washingtonon Wednesday, May 1, 2024.
“It is likely that gaining greater confidence,” he added, “will take longer than previously expected.” Still, Powell sketched out a series of potential scenarios for the months ahead. He said that if hiring stayed strong and “inflation is moving sideways,” that “would be a case in which it would be appropriate to hold off on rate cuts.”
The central bank’s overarching message Wednesday—that more evidence is needed that inflation is slowing to the Fed’s target level before the policymakers would begin cutting rates—reflects an abrupt shift. As recently as their last meeting on March 20, the officials had projected three rate reductions in 2024, likely starting in June.
Average prices, though, remain well above their pre-pandemic levels, and the costs of services ranging from apartment rents and health care to restaurant meals and auto insurance continue to surge. With the presidential election six months away, many Americans have expressed discontent with the economy, notably over the pace of price increases.
Instead of allowing $60 billion in Treasuries to roll off each month, it will allow just $25 billion. At the same time, it will continue letting $35 billion in mortgage-backed bonds mature each month.
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