- The Federal Reserve kept interest rates steady in its latest decision Wednesday.
- Powell argued that the Fed needed more data before it could cut interest rates.
- This means relief likely won’t come until the second half of the year.
The country’s central bank offered no surprises in its latest interest rate decision.
On Wednesday, the Federal Open Market Committee announced that it would keep interest rates stable, continuing the rate pause that began in September. This is further evidence that the Federal Reserve is waiting for more economic data to ensure the economy is moving in the right direction before implementing rate cuts.
While the FOMC predicted three interest rate cuts for 2024, inflation is not quite where the Fed hoped. The consumer price index, which measures inflation, rose 3.5% year-on-year in March, a slight increase from 3.2% year-on-year in February.
Even with a strong labor market, Fed Chairman Jerome Powell said the Fed still has work to do to get closer to its 2% inflation target, meaning rates could stay higher higher than the Americans could have hoped for.
“Recent data has clearly not given us more confidence and instead indicates that it will likely take longer than expected to achieve that confidence,” Powell said. said during a roundtable in Washington in April.
That means rate cuts could likely be pushed into the second half, which could coincide with the presidential election in November. That timing drew criticism from former President Donald Trump, who accused Powell in a February interview with Fox News that the timing of the rate cut would “help the Democrats.”
“It seems to me like he’s trying to lower interest rates in an effort to maybe get people elected,” Trump said. The Wall Street Journal also recently reported that some members of Trump’s team were hatching a plan that would give Trump a say in interest rate decisions, as well as the power to oust Powell from his post .
Powell argued that the Fed is not political and makes decisions based solely on economic data.
“Our analysis is free from personal or political bias, serving the public,” Powell said during a discussion in April. “We won’t always get it right – no one does. But our decisions will always reflect our careful assessment of what is best for our economy in the medium and long term – and nothing else.”
Whether or not rate cuts coincide with the election, data will be key going forward – and while forecasts could change in the coming months, the central bank will likely move slowly on interest rate relief This year.
“Inflation has continued to soar and there is no need for the Fed to cut interest rates until it is satisfied with the direction inflation is heading,” Greg McBride said. , Bankrate’s chief financial analyst, in a statement.
businessinsider
