Inflation is still too high, US Fed Reserve holds rates steady

The U.S. Federal Reserve held interest rates steady on Wednesday and signaled it is still leaning towards eventual reductions in borrowing costs, but put a red flag on recent disappointing inflation readings that could make those rate cuts a while in coming.Indeed, Fed Chair Jerome Powell said that after starting 2024 with three months of faster-than-expected price increases, it "will take longer than previously expected" for policymakers to become comfortable that inflation will resume the decline towards 2% that had cheered them through much of last year.
Citing a "lack of further progress" towards its two percent inflation target, the Fed said in a statement, “The economic outlook is uncertain, and the Committee remains highly attentive to inflation risks.” Inflation has cooled from a peak of 7.1%, as per the US Fed’s preferred measure, to 2.7%, it said.The Fed also said that, starting in June, it would slow the pace of decline of its securities holdings, by “reducing the monthly redemption cap on Treasury securities from $60 billion to $25 billion.”
The US central bank’s latest message marks an abrupt shift in its timetable on interest rates as following its last meeting on March 20, the Fed’s policymakers projected three rate reductions in 2024, likely starting in June.Rate cuts by the Fed would lead to lower borrowing costs for consumers and businesses and provide relief for mortgages, auto loans and credit cards as well.The Fed maintained its overall assessment of economic growth, saying that the economy "continued to expand at a solid pace. Job gains have remained strong and the unemployment rate has remained low." Powell reconciled that with the relatively weak, 1.6% growth of gross domestic product in the first quarter by saying that the 3.1% increase in private domestic demand was a better gauge of where the economy stands, with output buttressed by a recent jump in immigration.