Federal Reserve Board Holds Benchmark Interest Rate Steady

The Federal Reserve Board on Wednesday held interest rates steady for the fourth straight time and cracked open the door to reducing rates later this year if inflation continues to subside. The widely expected decision left interest rates unchanged at a range of 5.25% to 5.5%, the highest level in 22 years.

Policymakers also made substantial changes to their post-meeting statement, softening some of its hawkish language. Officials dropped a sentence that suggested additional hikes may be warranted and swapped in more neutral language about the path of monetary policy in coming months.

The policy-setting Federal Open Market Committee acknowledged that the “risks to achieving its employment and inflation goals are moving into better balance” but cautioned that rate cuts are not imminent.

“In considering any adjustments to the target range for the federal funds rate, the Committee will carefully assess incoming data, the evolving outlook, and the balance of risks,” the statement said. “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.”

If the economy evolves broadly as expected, it will likely be appropriate to begin dialing back policy restraint at some point this year,” Chair Jerome Powell told reporters during a post-meeting press conference in Washington, D.C. “But the economy has surprised forecasters in many ways since the pandemic, and ongoing progress toward our 2% inflation objective is not assured.”

“Based on the meeting today, I would tell you that I don’t think it’s likely that the committee will reach a level of confidence by the time of the March meeting to identify March as the time to do that. But that’s to be seen,” Powell said.