The Federal Reserve left interest rates unchanged for a seventh straight meeting on Wednesday, saying the U.S. economic outlook remained “uncertain” even with a better-than-expected report indicating that inflation was cooling.
The unanimous decision by the Federal Open Market Committee came several hours after the U.S. Bureau of Labor Statistics reported that inflation retreated slightly last month, declining to a 3.3% annual rate from a year earlier, down from 3.4% in April. The report also beat Wall Street forecasts that estimated a 0.1% monthly increase and an annual gain of 3.4%.
Federal officials cited “modest further progress” toward reaching the committee’s 2% inflation objective thanks to stronggains in the labor market and low unemployment. They noted that even though inflation has eased over the past year, it still remains elevated at 3.3%.
“The Committee judges that the risks to achieving its employment and inflation goals have moved toward better balance over the past year,” the FOMC said in a statement accompanying its decision. “The economic outlook is uncertain, and the Committee remains highly attentive to inflation risks.”
For nearly a year, interest rates have held at 5.25%-5.5%, representing a 23-year high.
The upbeat inflation report sent gold and silver trading higher Wednesday morning, and both precious metals continued to make afternoon gains after the Fed’s decision on interest rates. Gold was up $8.25 in afternoon trading at $2,326 per ounce, while silver rose $0.41 at $29.78 an ounce.
Even though federal officials revised earlier plans from three rate cuts to just one by the end of 2024, many investors interpreted Wednesday’s economic outlook as a sign that the adjustment could come by September.
In a news conference after the FOMC meeting, Fed Chairman Jerome Powell said the morning’s report showing a pullback in inflation is what monetary policymakers hoped for, but cautioned that it was too soon to determine whether inflation had truly been tamed, opting instead to await more data showing consistent lowering toward the 2% benchmark.
“We’re looking for something that gives us confidence that inflation is moving down to 2%,” Powell said. “It’s only one reading; you don’t want to be motivated by any one single data point.”
