The Federal Reserve formally shifted its interest-rate outlook, providing flexibility to lower rates in the coming months if it is convinced inflation hazards have receded.
As expected, the central bank left its benchmark federal-funds rate in a range between 5.25% and 5.5% on Wednesday, where it has stood since July.
MORE ON THE FED DECISION
Fed’s Press Release
In its policy statement, the Fed said, “the risks to achieving its employment and inflation goals are moving into better balance,” and it outlined how changes to its economic outlook could prompt “adjustments” to the target range. That was a more neutral description than previous references to the prospect of “additional policy firming,” or higher rates, that officials had maintained since last lifting rates six months ago.
At the same time, the Fed signaled the shift in its outlook shouldn’t imply a rate cut is imminent. “The committee does not expect it will be appropriate to reduce the target range until it has gained greater confidence that inflation is moving sustainably toward 2%,” the statement said.
In December, most officials anticipated they could cut rates three times this year if inflation continued to decline gradually to its 2% target and economic growth was steady but unspectacular.
Fed Chair Jerome Powell
