WASHINGTON (NEWSnet/AP) — The Federal Reserve on Wednesday said it doesn’t plan to cut interest rates until it has “greater confidence” that price increases are slowing sustainably to its 2% target.

The Fed issued its decision in a statement after its latest meeting, at which it kept its key rate at a two-decade high of roughly 5.3%.

Several reports on prices and economic growth have recently undercut the Fed’s belief that inflation was steadily easing.

“In recent months,” Chair Jerome Powell said at a news conference, “inflation has shown a lack of further progress toward our 2% objective.”

“It is likely that gaining greater confidence,” Powell added, “will take longer than previously expected.”

The central bank’s latest message reflects an abrupt shift in its timetable on interest rates.

As recently as their last meeting on March 20, the Fed’s policymakers had projected three rate reductions in 2024, likely starting in June. Rate cuts by the Fed would lead, over time, to lower borrowing costs for consumers and businesses, including for mortgages, auto loans and credit cards.

But given the persistence of elevated inflation, financial markets now expect just one rate cut this year, in November, according to futures prices tracked by CME FedWatch.

The Fed’s more cautious outlook stems from three months of data that pointed to chronic inflation pressures and robust consumer spending.

Inflation has cooled from a peak of 7.1%, according to the Fed’s preferred measure, to 2.7%, as supply chains have eased and the cost of some goods has actually declined.

Average prices, however, remain well above their pre-pandemic levels, and the costs of services ranging from apartment rents and health care to restaurant meals and auto insurance continue to surge. 

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