Select Page

On Wednesday, May 1, the Federal Reserve decided NOT to cut interest rates at its May 1 meeting. That was the decision expected by the financial markets.

And Federal Reserve chair Jerome Powell tried his best to keep traders from speculating that the Fed would actually raise interest rates, rather than cut them, in the remainder of 2024.

“So far this year, the data have not given us that greater confidence in particular” that rate cuts are appropriate, Powell said at his press conference. “Readings on inflation have come in above expectations. It is likely that gaining such greater confidence will take longer than previously expected.”

Still, Powell said, it’s unlikely that the Fed’s next move would be to raise interest rates, saying officials would need to see persuasive evidence that policy is not tight enough to bring inflation back toward the central bank’s 2% target. “We don’t see evidence supporting that conclusion,” he added.

And the Fed signaled that, to some degree, it believes the economy is strong enough–maybe–to withstand a continued minor reduction in Treasury market liquidity. The Fed said it will lower the monthly cap on how many Treasuries it will allow to mature without reinvesting, to $25 billion from $60 billion, while keeping the cap for mortgage-backed securities unchanged at $35 billion. (When the Fed allows a Treasury in its portfolio to mature without buying a new replacement Treasury, it takes liquidity out of the financial system.) The central bank has been winding down its portfolio holdings of Treasuries and mortgage backed securities since June 2022—a process known as quantitative tightening.

The next words that you’ll hear on inflation will come from the Bureau of Labor Statistics when it releases the job report for April tomorrow, May 3, morning.