The Federal Reserve indicated Wednesday it may hold interest rates steady at its next meeting, citing a complex economic landscape marked by cooling inflation but persistent labor market strength. The signal came in minutes from the most recent Federal Open Market Committee meeting, released after markets closed.
Core inflation has declined to 3.1 percent on an annualized basis, still above the Fed's 2 percent target but well below peak levels seen in 2022. Meanwhile, the unemployment rate remains at a historically low 3.8 percent, complicating the central bank's calculus.
Fed Chair Jerome Powell, speaking at a conference in Washington, struck a cautious tone. "We are data-dependent," he said. "We will make our decisions meeting by meeting based on the totality of the incoming information and its implications for the outlook."
Markets reacted positively to the news, with the S&P 500 gaining 1.2 percent on the session. Bond yields fell as investors priced in a higher probability of rates remaining unchanged through the summer.
Economists are divided on the path forward. Some argue the Fed has already done enough to bring inflation to heel and risks overtightening if it continues raising rates. Others warn that services inflation remains stubbornly elevated and premature easing could reignite price pressures.
