US Fed leaves rates unchanged amid inflation progress, avoids signaling imminent rate cut

The US Federal Reserve on Wednesday left interest rates unchanged at a 22-year high of 5.25 percent to 5.5 percent as inflation continued to cool, while avoiding the signal of an imminent rate cut going forward.

This latest policy meeting, the first in 2024, marked the fourth straight meeting for the central bank to hold policy rate steady.

At a press conference Wednesday afternoon, Fed Chair Jerome Powell said that inflation eased from its highs without a significant increase in unemployment, which was "very good news," while noting that inflation remained above the Fed's longer-run goal of 2 percent.

Total personal consumption expenditures (PCE) prices rose by 2.6 percent over the 12 months ending in December; excluding the volatile food and energy categories, core PCE prices rose by 2.9 percent.

"Inflation is still too high, ongoing progress in bringing it down is not assured, and the path forward is uncertain," he said.

When asked whether he felt comfortable saying the economy reached a soft landing, the Fed chair gave a firm "no".

"I would not say we reached the 12-month target on core inflation. We are certainly encouraged by the progress, but we are not declaring victory at all at this point. We think we have a ways to go," he said.

Powell said the Federal Open Market Committee (FOMC), the Fed's policy-setting body, believed that policy rate was likely at its peak for this tightening cycle, and that if the economy evolved broadly as expected it would begin to ring back policy rank.

In considering "any adjustments" to the target range for the federal funds rate, the Committee would carefully assess incoming data, the evolving outlook, and the balance of risks, the FOMC said in a statement after concluding the two-day policy meeting.

"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," the committee said.

Powell said reducing policy restraint "too soon or too much" could result in a reversal of the progress on inflation and ultimately require even tighter policy to get inflation back to 2 percent.

At the same time, reducing policy restraint "too late or too little" could unduly weaken economic activity and employment, he added.