Fed keeps rates steady, says US inflation still elevated

The news: The US Federal Reserve left interest rates unchanged and reiterated it won’t cut rates until it has greater confidence that inflation has dropped toward its 2% inflation target.

The numbers: The US central bank left its overnight interest rate in the 5.25%-5.50% range, a level that has been unchanged since last July. US stocks and Treasury yields fell following the release of the Federal Open Market Committee statement while the US dollar rose against a basket of currencies.

The context: While the Fed took a major step towards lowering rates in coming months, it’s latest policy statement gave no hint that a rate cut was imminent. "Inflation has eased over the past year, but remains elevated," it said in the statement after a two-day meeting. Speaking later in a press conference, Fed Chair Jerome Powell cautioned that the Fed's struggle to lower inflation is not over, noting "we are not declaring victory, we think we still have a way to go". The central bank will likely cut rates “at some point this year", Powell said, but added it will still take time to see if the data supports an easing in monetary policy.

The statement language was a blow to investors who have been expecting rate cuts to start as early as March.