This marks the seventh time the central bank has maintained its policy since July 2023, when it last raised the rate.
The Fed opted to maintain its rate against that backdrop as it continues to wait for more data, saying it wants more confidence that inflation is moving sustainably toward its target level of 2 percent.
Citing the median projection for the Fed’s favored inflation measure, the Personal Consumption Expenditures Price Index, Powell said the expectation is it will fall to 2.6 percent this year, 2.3 percent next year and 2 percent in 2026.
He said economic uncertainty remains, although there has been modest progress. Powell added the central bank will remain attentive to inflation risks and will not move until there is more positive data to bolster its confidence.
“We know that reducing policy restraint too soon or too much could result in a reversal of the progress that we’ve seen on inflation. At the same time reducing policy restraint too late or too little could unduly weaken economic activity and employment,” he said. Based on assessments from FOMC participants, the federal funds rate is projected to be 5.1 percent in 2024, 4.1 percent in 2025 and 3.1 percent in 2026. Powell was careful to note that these are just projections and not a committee plan or decision; the Fed will continue to make its choices meeting by meeting.
Meanwhile, precious metals prices saw high volatility throughout the day. The gold price spiked as high as US$2,340 per ounce following the release of the CPI data, and neared that mark leading up to the Fed decision.
The silver price followed the same pattern and broke above US$30 per ounce during both upward swings. However, both precious metals fell back down on the news that rates will not move. As of 4:00 p.m. EDT, gold was trading at US$2,321.26 and silver was trading at US$29.62, still above their prices at the start of the day.
Securities Disclosure: I, Dean Belder, hold no direct investment interest in any company mentioned in this article.
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