The Federal Reserve has maintained its benchmark interest rate at 5.25%-5.50% for the seventh consecutive meeting, as announced in a press conference by Chair Jerome Powell on Wednesday.
According to Powell, the labor market has achieved a more "balanced" state, due to an influx of immigrant workers and a rise in the labor force participation rate among those aged 25 to 54. "The data suggest that the job market has returned to pre-COVID levels," Powell stated, emphasizing the recovery's milestones.
However, the Fed Chair conveyed the central bank's cautious stance toward inflation, mentioning that they have not yet gained sufficient confidence that inflation is sustainably moving toward the Fed's 2% goal. "We will need to see more good data," Powell asserted.
Fed Chair Jerome Powell: "Inflation has eased substantially from a peak of 7% to 2.7%, but is still too high." pic.twitter.com/B7V2F4IClw
— TFTC (@TFTC21) June 12, 2024
During the press conference, Powell remarked, "By so many measures, the labor market was overheated two years ago." The Fed is expecting a continued gentle cooling of the labor market without any significant downturn.
Addressing the Federal Open Market Committee's projections, Powell stated, "I think what everyone agrees on is that policy will be data-dependent." He also acknowledged that the central bank policymakers are assuming moderate inflation figures and are adopting a "conservative approach" to their forecasts.
Powell stressed that policymakers are not yet ready to consider a rate cut until there is greater assurance that inflation is trending towards the 2% mark. Notably, Powell referenced the latest consumer price index, which showed a 3.3% increase year over year in May, slightly below economists' expectations. "We welcome today's reading and then hope for more like that," he commented.
