In a plot twist with all the narrative excitement of a tepid board meeting, the Federal Reserve, in a display of fiscal restraint that would make Scrooge McDuck nod approvingly, held interest rates steady on Wednesday for the seventh consecutive time. This much-anticipated non-event arrived as the central bank continues its delicate ballet between cooling inflation and not kicking the economy in the shins.
The Fed’s key benchmark rate remains in the famously unglamorous range of 5.25 to 5.5 percent, a level not seen since an era when people still enthusiastically used QR codes. Inflation, which continues to flirt just out of reach of the Fed’s 2 percent target, is proving as reluctant to settle down as a toddler after a birthday party.
Federal Reserve Chair Jerome Powell, whose job is to radiate calm while issuing sentences that sound like they were drafted by a committee of economists and then lightly sedated, acknowledged that while inflation has cooled from its previous tantrum levels, progress has lately decided to take a coffee break. “It is likely that gaining greater confidence that inflation is sustainably moving toward 2 percent will take longer than previously expected,” Powell said, using the verbal equivalent of gently lowering expectations into a feather bed.
This all means that those eagerly awaiting a rate cut will need to curb their enthusiasm, at least for the foreseeable future. Investors, who had been eyeing June as the month the Fed might finally blink and lower rates, are now shifting their focus further into the calendar, possibly to September or even the delightfully vague “sometime later this year.”
Meanwhile, markets reacted with the kind of anxious energy normally reserved for cats encountering cucumbers, as stocks bobbed uncertainly and bond yields yawned politely. Consumer hopes for cheaper borrowing costs on mortgages and credit cards remain on hold, presumably along with their summer vacation plans.
In summary, the Fed is staying the course, inflation is staying annoying, and everyone else is staying confused.
Turns out the only thing cooling faster than inflation might be the hope for cheaper loans.