Citing that jobs gains have remained strong, the unemployment rate has remained low and inflation remains high, the Federal Open Market Committee voted Wednesday to hold the federal funds rate at 5.25% to 5.5%.
Still, the committee noted that in recent months, there has been modest further progress toward its 2% inflation objective.
Compared to its May statement, the current statement upgraded “lack of progress” to “modest further progress” with respect to achieving the central bank’s 2% inflation target.
The FOMC’s statement indicates that the Fed will not consider a rate cut until it has gained greater confidence that inflation is moving sustainably toward 2%. That means sustained lower inflation readings.
“With today’s announcement, the Fed confirms its higher-for-longer position on interest rates,” says Selma Hepp, chief economist for CoreLogic, in a statement. “But the stance is looking more untenable as more American households continue to pull back on spending. As more economic indicators begin to confirm this and unemployment begins to rise, the Fed will then look to cut rates. What’s not clear yet is when exactly the disinflation signs will be consistent enough for the first rate cut – we hope it’s still this year.”
Photo: Aditya Vyas