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‘Lack of further progress’ on inflation keeps interest rates high

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‘Lack of further progress’ on inflation keeps interest rates high

Federal Reserve Chairman Jerome H. Powell said the central bank needs “more confidence” that inflation is falling before it decides to cut interest rates, which are at a two-decade high.

Today, the FOMC decided to leave our policy rate unchanged and continue to reduce our securities holdings, albeit at a slower pace. Restrictive monetary policy has put downward pressure on economic activity and inflation, and risks to achieving our employment and inflation targets have shifted towards a better balance over the past year. However, in recent months inflation has shown a lack of further progress towards our 2 percent target, and we remain very alert to inflation risks. We have stated that we do not expect it will be appropriate to lower the target range for the federal funds rate until we have greater confidence that inflation is moving sustainably toward 2 percent. So far this year, the data hasn’t given us that greater confidence. In particular, and as I have noted before, inflation rates have exceeded expectations. It is likely that achieving such increased trust will take longer than previously expected.

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