The Federal Open Market Committee pressed pause on cutting interest rates Wednesday.
After cutting rates more than 100 basis points in the past three meetings, the FOMC decided to keep the federal target rate between 4.25 and 4.5 percent.
“My colleagues and I remain squarely focused on achieving our dual mandate goals of maximum employment and stable prices for the benefit of the American people,” said Federal Reserve Chairman Jerome Powell. “The economy is strong overall and has made significant progress toward our goals over the past two years. Labor market conditions have cooled from their formerly over-heated state and remain solid. Inflation has moved much closer to our 2 percent longer-run goal, though it remains somewhat elevated. In support of the goals, the Federal Committee decided to leave the policy interest rate unchanged.”
Going into the January meeting, Powell and his colleagues received new inflation and jobs numbers from the U.S. Bureau of Labor Statistics.
The annual inflation rate ticked up in December to 2.9 percent. It was at 2.7 percent in November.
On the jobs front, unemployment dropped from 4.2 percent in November to 4.1 percent in December. The economy added 256,000 jobs.
“We are seeing the economy move toward 2 percent inflation, and has moved largely to maximum employment, so, we really are looking at the movement toward the goal there,” Powell said. “Now, the policy is meaningfully less restrictive than it was before we began to cut, 100 basis points less restrictive. For that reason, we will be focusing on seeing real progress on inflation, or some weakening in the labor market, before we consider making adjustments.”
Though the FOMC has cut rates in the last six months, the mortgage and automotive rates have not moved. The 30-year fixed rate mortgage was at 6.96 percent last week, according to Freddie Mac. It was a slight drop from the 7.04 percent in mid-January.
According to new numbers from Cox Automotive, the used vehicle loan rate was at 13.91 percent in early January. That was an increase from the two-year lows in December of 13.4 percent.
“For reasons unrelated to our policy, longer rates have moved up,” Powell said.
Powell continued to say the economy is strong and the committee will be taking a cautious approach moving forward on rate changes.
“The economy is strong, the labor market is solid and the downside risks to the labor market we think have abated and continue on a sometimes slow and bumpy path… the broad sense of the Committee is we don’t need to be in a hurry to adjust the policy stance,” Powell said.
