WASHINGTON–As expected, the Federal Open Markets Committee has adjourned its meetings here without taking any action on rates.
It did offer indications, however, that it sees signs the market is changing in ways that will allow it to cut rates later this year.
“(The) risks to achieving its employment and inflation goals are moving into better balance,” the Fed stated, before adding that changes to its economic outlook could prompt “adjustments” to the target range.
In prior statements, the Fed had said “additional policy firming,” meaning higher rates, may be needed, but did not include the statement following the close of the most recent meeting.
However, the Fed also poured water on any expectations of rate cuts in the immediate term.
Tamping Down Expectations
“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 a press conference following the adjournment of the FOMC meeting, Federal Reserve Chairman Jerome Powell said he does not believe it is “likely” the Fed would have enough confidence to cut interest rates by their next meeting in March.
Analysts and economists inside credit unions and out have predicted the Fed will not move to cut rates until May, at the earliest.
In an earlier interview, Fed Gov. Christopher Waller said that due to the strength of the economy, “we can take our time to make sure we do this right.”
Credit Union Reaction
"The FOMC’s January statement was noncommittal, highlighting the wide gap between hawks and doves on the Committee," said America's Credit Unions Vice President of Research and Chief Economist Curt Long. "While the majority of changes to the statement were dovish, including the elimination of language indicating a tightening bias and the acknowledgement that risks to full employment are growing, there was also the significant inclusion that any reductions in the fed funds rate will require 'greater confidence' in the trajectory for inflation. Rate cuts are coming, but it is clear that hawks are not ready to concede just yet, and as a result May is a more likely candidate than March for the first cut."