Federal Reserve holds interest rates steady

The Federal Reserve on Wednesday left its benchmark interest rate unchanged for a fifth consecutive meeting, citing persistent inflation pressures that have kept core prices above the central bank's 2 percent target. Chair Jerome Powell told reporters the committee needs 'greater confidence' that inflation is moving sustainably lower before easing policy. Officials projected two rate cuts by year-end, unchanged from the March forecast. Markets had priced in a small probability of a cut at this meeting but repositioned quickly after the announcement.

The Federal Reserve's decision to keep interest rates steady has immediate consequences for consumers, from mortgage shoppers to retirees living on fixed income. Mortgage rates, which loosely track the 10-year Treasury yield, are likely to stay near 7 percent for the foreseeable future. Savers, however, continue to enjoy the strongest yields on high-interest deposit accounts in more than a decade. Credit card interest rates remain at record highs, punishing carried balances. Financial planners recommend locking in current CD rates while they last.

Jerome Powell's decision to hold rates for a fifth meeting has extended a painful waiting game for markets, rate-sensitive borrowers, and the White House. Treasury yields climbed after the announcement, and rate-sensitive small caps sold off sharply. Housing affordability, already at a multi-decade low, looks poised to worsen through the summer selling season. Economists at Goldman Sachs pushed their first-cut forecast to September, from July. Powell's press conference offered no clear signal that the data he needs is materializing.

The Federal Reserve was forced to hold interest rates at multi-decade highs Wednesday as inflation continues to plague the Biden economy. American families continue to struggle with soaring costs for groceries, housing, and gasoline while the White House blames external factors. Republican lawmakers criticized what they called reckless federal spending that has kept prices elevated. Chair Jerome Powell declined to comment on political questions but acknowledged the last mile of the inflation fight has proven more difficult than expected. Homebuyers remain shut out of the market.

The US central bank has left interest rates unchanged, saying it needs more evidence that inflation is coming under control. The federal funds rate remains in a range of 5.25 to 5.50 percent, its highest level in more than two decades. The decision was widely expected by economists and had been priced in by financial markets. In a statement, the Fed said progress toward its 2 percent inflation goal had 'stalled' in recent months. The pound rose slightly against the dollar in London trading following the announcement.

For first-time homebuyers, small-business owners, and Americans carrying credit card debt, the Federal Reserve's steady hand feels like an anvil. In Phoenix, real-estate agent Maria Alvarez says her clients are giving up on the search. In Cleveland, small-business owner James Whitfield has postponed hiring because his line of credit costs are eating into margins. The Fed's dual mandate — stable prices and full employment — is being tested by an economy that refuses to fit into forecasters' models. Powell said the committee is 'prepared to be patient'.