Fed left interest rates unchanged in the 5.25-5.50% range, in-line with market expectations. Statement repeated that FOMC needs greater confidence in inflation returning to target before cutting rates. New 'dot-plot' showed just a single rate cut this year, compared to 3 cuts in March projections. However, there was an almost 50-50 split between members who saw 1 cuts and those who saw 2. Inflation forecasts were boosted. Overall, the statement and new projections can be seen as hawkish. Market reacted with USD gaining, while indices and gold moved lower. Market attention now turns to Powell's presser during which Fed chief will explain today's decision in more detail.
Post-decision press conference of Fed Chair Powell began at 7:30 pm BST. Below are key takeaways (live updates).
Opening statement
- Economy has made considerable progress towards inflation and employment gains over the past two years
- Inflation eased significantly, but is still too high
- Fed maintains restrictive stance of monetary policy
- Recent indicators suggest that economy continued to expand at a solid pace
- Fed expects GDP to slow from last year's pace
- Labor market is coming into better balance
- We expect labor market strength to continue
- Recent monthly inflation readings have eased somewhat
- Risks to achieving the dual mandate are in better balance
- So far this year we have not got greater confidence on inflation in order to cut
- We will need to see more good data to bolster confidence on inflation
- Economic projections are not a plan
- If economy remains solid and inflation persists, we are prepared to maintain the rate where it is as long as appropriate
Q&A session
- If jobs are to weaken unexpectedly, Fed is ready to respond
- We don't have high confidence in forecasts
- Test for cutting rates is more confidence that inflation is moving towards 2%
- We have a fairly conservative forecast on inflation, if we get better reading, I think we will see the forecast come down
- Policymakers are not trying to send a strong signal with forecasts
- Unexpected weakness in the labor market could also call for a response
- FOMC members were allowed to update their economic projections to incorporate today's CPI data, but most didn't update their forecasts
- Employment is still strong, but unemployment moved up a bit and that's an important statistic
- Its no longer super heated labor market of a few years ago
- Today was a better inflation report than almost anyone expected
- We have to see what today's data means for the balance of risks
- People are coming to the view that rates are less likely to go down to pre-pandemic levels
- Policy is restrictive and the question of whether its restrictive enough will be answered over time
- We think our policy stance is about right
- We are seeing what we wanted to see in the economy right now
- Still seeing elevated inflation in non-housing services
- There's been surprising increase in import prices of goods
- 2% inflation target will likely require a lower wage growth
- Credit card balance and defaults are not at high levels
