The Federal Reserve has kept interest rates unchanged at its latest meeting citing a “lack of further progress” in recent months toward bringing inflation down to its 2% target.
The central bank kept its benchmark interest rate in the range of 5.25% to 5.5%, a 23-year high.
The benchmark interest rate has been in this range since July 2023.
“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%,” Fed official said in a statement following the conclusion of its two-day meeting.
“The economic outlook is uncertain, and the committee remains highly attentive to inflation risks.”
However, the Fed highlighted progress towards reaching its employment and inflation targets are in "better balance" than they were a year ago.
At a press conference on Wednesday afternoon, Fed chair Jerome Powell warned that it may take “longer than previously expected” for the Fed to gain confidence inflation is headed toward 2% and in turn, for it to reduce interest rates.
“So far this year, data has not given us that greater confidence. Readings on inflation have come in above expectations,” he said. “It is likely that gaining such greater confidence will take longer than previously expected.”
He added that is is "unlikely" the next policy move would be a rate hike.
Additionally, the Fed announced it would continue the process of reducing its securities holdings but at a slower pace.
Markets welcomed the Fed’s update, with the Nasdaq adding 1.1%, the Dow Jones up 1%, and the S&P 500 up 0.7%.
XTB research director Kathleen Brooks said the Fed’s statement suggests that once the pace of employment and inflation gains retreat, rate cuts could be back on.
“The Fed says it will keep rates on hold, and has not opened the door to a rate hike,” she said.
“This is much of the same from Powell so far. He sounds worried about the economy and employment levels, at the same as remaining data dependent.”