The Federal Reserve on Wednesday said it is maintaining the federal funds rate in a range of 5.25% to 5.5%. Still, most members of the Federal Open Market Committee are still projecting three rate cuts later in 2024, matching the bank’s earlier forecast for the number of rate reductions this year, according to the Fed’s Summary of Economic Conditions.
At a Wednesday press conference, Chair Jerome Powell pointed to stubbornly persistent inflation in January and February’s to explain the decision to hold rates steady, adding that the central bank doesn’t want to cut prematurely and risk a flare-up of inflation.
“We said it was going to be bumpy ride, and now we’re seeing that,” Powell said. “The question is whether they are more than bumps, and we don’t know that.”
Inflation in February rose 3.2% on an annual basis, faster than January’s 3.1% increase. Despite that recent increase, Powell added he is confident inflation will eventually recede to the bank’s 2% goal. But he reiterated that the Fed is prepared to hold the line on rates until policymakers see more evidence that inflation is fading.
“We believe our policy rate is likely at its peak for this tightening cycle,” he said. The Fed “will likely begin dialing back policy restraint some point this year.”