More progress on inflation needed before cutting.
The Federal Reserve on Wednesday held its benchmark interest rate steady in a range of 5.25% to 5.5%.
After rapidly raising rates starting in early 2022, the Fed has held rates unchanged for the past year as inflation has moderated in a bumpy fashion back to a 2.5% annual rate.
Central bank officials made no changes to their crucial policy statement that they do not expect it will be appropriate to cut rates until they have gained greater confidence that inflation is moving sustainably toward their 2% target.
There were many minor adjustments to the statement to show that the Fed is watching the job market more closely.
The vote by the 12 Fed voting members was unanimous.
There will be two more months of inflation data before the central bank meets again in mid-September. Traders in derivative markets fully expect a first rate cut at that meeting, followed by a succession of additional cuts.
The Fed officials signaled they will give more weight to a weakening labor market when deciding when to cut interest rates in response to “moderating” job gains and rising unemployment.
In its latest statement the Fed introduced a new phrase, saying top officials are “attentive to the risk to both sides of its dual mandate.”
The dual mandate refers to the Fed’s congressionally mandated mission of maintaining low inflation and low unemployment.
At the same time, the Fed dropped language saying it is “highly attentive to inflation risks.”
For the past few years, the Fed has been almost entirely focused on the inflation side of its mandate. Inflation soared to a 40-year high of 9.1% a few years ago, while the unemployment rate sank to a nearly 50-year low of 3.4%.
Inflation has since fallen to around 3% a year, while the jobless rate has moved up to 4.1%.
