US Fed unlikely to raise interest rate amid lingering inflation

Federal Reserve Chair Jerome Powell addressed concerns over inflation during a post-meeting press conference on Wednesday, indicating that despite inflation levels persistently hovering above the 2% target, the central bank is unlikely to implement an interest rate increase.

Powell underscored the necessity for convincing evidence that the current policy stance isn't overly restrictive in addressing inflation.

Consumer inflation, measuring a 3.5% annual rise in March, surpassed market expectations and remained above the Fed's desired threshold. Powell reiterated the Federal Open Market Committee's (FOMC) commitment to achieving greater confidence in inflation's trajectory toward the 2% target.

In light of economic data so far this year, Powell expressed that the FOMC hasn't attained the desired level of confidence in inflation reduction. He indicated that the process of gaining such confidence may take longer than initially anticipated, emphasizing the importance of patience and thorough assessment.

"We are prepared to maintain the current target federal funds rate for as long as appropriate," Powell stated, signaling a commitment to a patient approach in monetary policy adjustments

The probability of a 25 basis points rate cut at the upcoming June meeting, according to the FedWatch Tool provided by the Chicago Mercantile Exchange Group, remained low at 9% as of Wednesday. However, probabilities for rate cuts in subsequent meetings, particularly in July (26%) and September (42%), were higher, reflecting market sentiment and expectations.

Market analysts speculate that the Federal Reserve's first interest rate cut could potentially be delayed until November or December of this year, considering the evolving economic landscape and the cautious approach taken by the central bank.

Source: Newsroom