The Federal Open Market Committee (FOMC), the panel of central bank officials that set borrowing costs, voted unanimously to keep the baseline interest rate at the range of 5.25 to 5.5 percent set last July.
“We believe that our policy rate is likely at its peak for this tightening cycle, and that if the economy evolves broadly as expected, it will likely be appropriate to begin dialing back policy restraint at some point this year,” Fed Chair Jerome Powell said at a press conference Wednesday.
The Fed is not yet confident inflation, which has fallen drastically since the Fed began raising rates from near zero in March 2022, is on pace to reach its goal of a 2 percent annual rate.
After peaking at a 40-year high of 9.1 percent in June 2022, as measured by the Labor Department’s consumer price index, annual inflation has eased significantly. The January CPI reading came in at 3.1 percent, but inflation ticked up slightly to 3.2 percent last month.
“Inflation has eased substantially while the labor market has remained strong. And that is very good news,” Powell said. “But inflation is still too high. Ongoing progress in bringing it down is not assured. And the path forward is uncertain.”
The job market has also continued to defy expectations.
The U.S. economy added 275,000 jobs last month, adding to significant gains in December and January.
The unemployment rate remained below 4 percent. The jobless rate has stayed below this marker for the last two years, the longest sub-4-percent streak since the 1960s.
Despite the recent uptick in inflation, Powell emphasized Wednesday that this hasn’t “really changed the overall story, which is that of inflation moving down gradually on a sometimes bumpy road toward 2 percent.”
The Hill’s Julia Shapero and Taylor Giorno have more here.
