Federal Reserve of the United States maintains interest rate, citing extended timeline for potential cuts

The U.S. Federal Reserve held interest rates steady on Wednesday, signaling a potential delay in rate cuts due to recent inflation numbers straying further from its two per cent target. Fed Chair Jerome Powell expressed that it may take longer than expected for officials to be confident in controlling inflation.

The Fed’s policy statement, issued after a two-day meeting, highlighted the need for specific economic conditions to lower borrowing costs. Following the release of the statement, U.S. stocks saw some recovery while the dollar weakened against other currencies.

Investors are now predicting rate cuts to begin in November, with at least one reduction expected this year. The Fed reiterated its stance that the next move on rates will likely be a decrease, emphasizing the need for greater confidence in inflation reaching the target.

Concerns about the timing of the first rate cut persist, with Fed officials expressing unease over the lack of progress towards the inflation objective. Some economists anticipate a divergence in monetary policy between the U.S. and Canada, with the Bank of Canada potentially cutting rates in June.

The Fed also announced a slower pace in unwinding its COVID-era policies, reducing the monthly runoff of Treasury securities and mortgage-backed bonds. Despite expectations for rate cuts earlier this year, the Fed has delayed action due to stagnant progress in inflation reaching the target.

Overall, the Fed’s policy statement maintained a positive outlook on economic growth, citing strong job gains and low unemployment rates. Analysts are closely watching for any signals of an impending rate cut as inflation remains a key concern for the central bank.