The Fed keeps interest rates at current levels, but signals a cut is coming

The Federal Reserve said Wednesday it will continue to hold its benchmark interest rate at current levels, marking a full year since the cost of borrowing first reached a 23-year high.

The Federal Reserve said Wednesday it will continue to hold its benchmark interest rate at current levels, marking a full year since the cost of borrowing first reached a 23-year high. As expected, central bank officials chose not to cut rates, which would have paved the way for lower borrowing costs for Americans on everything from mortgages and car loans to credit cards. However, the Fed gave an important clue Wednesday that it will likely cut its benchmark lending rate in the coming months: Fed officials are now wary of risks surrounding America’s labor market, which has long been a pillar of strength for the economy, according to their latest policy statement. Officials wrote that inflation is now “somewhat” elevated — the first time inflation has been described in such a way since the Fed began to lift rates in March 2022. This shift in how the Fed is viewing the economy means the central bank could begin paring back interest rates as soon as its next policy meeting, in September, easing pressure on US households and businesses burdened by tough borrowing costs. Central bankers have said in recent speeches that they’re pleased with the latest inflation data, and some have pointed to the risks of not cutting rates with inflation inching closer to the central bank’s 2% target.