US Fed keeps rates on hold, to slow balance sheet runoff

The news: The US Federal Reserve held interest rates steady and signalled it is still leaning towards eventual rate cuts but chair Jerome Powell said it was likely to take longer than previously expected.

The numbers: The US central bank’s benchmark policy rate has been held in the current 5.25%-5.50% range since July. Rate cuts had been anticipated as early as March of this year, but have been pushed back as incoming inflation data showed that progress towards the 2% target had stalled.

The personal consumption expenditures price index, which is the Fed's preferred inflation gauge, increased 2.7% in March on a year-over-year basis.

The context: Fed chair Jerome Powell said it was likely to take longer than previously expected for Fed officials to gain the "greater confidence" needed for them to kick off interest rate cuts. The Fed's latest policy statement kept key elements of its economic assessment and policy guidance intact, noting that "inflation has eased" over the past year, and framing its discussion of interest rates around the conditions under which borrowing costs can be lowered. US stocks pared losses while US Treasury yields fell following the release of the policy statement while the US dollar fell against a basket of currencies.