Fed Signals Rate Cuts Are Coming but Not Imminent

The Federal Reserve signaled it was thinking about when to lower interest rates but hinted a cut wasn’t imminent when it held rates steady at its first policy meeting of the year on Wednesday.

The central bank held its benchmark federal-funds rate steady in a range between 5.25% and 5.5%, the highest level in more than two decades, as it awaits more convincing evidence that a sharp downturn in inflation at the end of last year will endure.

“It’s a highly consequential decision to start the process” of lowering interest rates “and we want to get that right,” said Fed Chair Jerome Powell at a news conference. “We’ve made a lot of progress on inflation. We just want to make sure that we do get the job done in a sustainable way.”

For most of January, investors in interest-rate futures markets have placed roughly 50% odds that the central bank would cut rates at its next meeting, March 19-20. But Powell volunteered on Wednesday that officials didn’t think a March cut was likely.

“I don’t think it’s likely that the committee will reach a level of confidence by the time of the March meeting” to justify a rate cut, “but that’s to be seen,” he said.

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