The Federal Reserve has kicked off 2024 with another interest rate pause. The central bank left the federal funds rate unchanged Wednesday, maintaining its range of 5.25 to 5.5 percent.
Economic factors weighing on the decision likely included subdued wage growth in the final months of 2023, as well as a cooling job market. Inflation, meanwhile, persists above the Fed’s goal of 2 percent.
“The lower inflation readings over the second half of last year are welcome,” Federal Reserve Chairman Jerome Powell said during the January 31 Federal Open Markets Committee press briefing. “But we will need to see continuing evidence to build confidence that inflation is moving down sustainably toward our goal. Longer-term inflation expectations appear to remain well-anchored, as reflected in a broad range of households, businesses and financial markets.”
Moving forward
While the markets had largely priced in January’s pause, many were looking to Powell’s comments for an indication as to when the first of a new round of rate cuts could be expected. After the third consecutive interest rate pause in December, Powell had hinted at a potential 2024 rate cut.
However, Powell noted Wednesday that decisions will be based on the totality of incoming data, saying that the FOMC needs greater confidence that inflation is under control.
“We believe that our policy rate is likely at its peak for this tightening cycle and that if the economy evolves broadly as expected it will likely be appropriate to begin dialing back policy restraint at some point this year,” said Powell. What no one can yet say is when.
