*Fed pushes back on spring cuts but holds rates steady at 5.25% to 5.5%*

The Federal Reserve held its key interest rate steady for a fourth consecutive meeting Wednesday, confirming market forecasts, but the central bank pushed back on the chances of a spring rate cut, warning that inflation remains elevated. The Federal Open Market Committee held its key policy rate at between 5.25% and 5.5%, the highest in 22 years, a move that Wall Street widely expected following the last quarter-point rate hike in July. The timing of any near-term rate cuts was left ambiguous, however, with officials noting a strong labor market, solid economic growth and low unemployment. "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 FOMC said in its regular policy statement. Federal Reserve Chairman Jerome Powell speaks at a news conference after a Federal Open Market Committee meeting in Washington on Nov. 1, 2023. The Fed on Jan. 31, 2024, pushed back on market estimates of a spring interest-rate cut. Photographer: Al Drago/Bloomberg via Getty Images Bloomberg/Getty Images "In assessing the appropriate stance of monetary policy, the Committee will continue to monitor the implications of incoming information for the economic outlook," the statement added. "The Committee would be prepared to adjust the stance of monetary policy as appropriate if risks emerge that could impede the attainment of the Committee's goals."Federal Open Market Committee statement: https://t.co/pmhmWCDMU2 #FOMC— Federal Reserve (@federalreserve) January 31, 2024 U.S. stocks extended declines immediately following the Fed decision and ahead of Chairman Jerome Powell's question-and-answer session with the media. The S&P 500 was marked 44 points lower, or 0.9%, on the session while the Dow Jones Industrial Average was down 45 points. The tech-focused Nasdaq was marked 232 points, or 1.5%, lower. Benchmark 10-year Treasury note yields rose 3 basis points to 3.981% following the interest rate decision while 2-year notes fell 21 basis points to 4.479%. The U.S. dollar index, meanwhile, gave back most of its declines from earlier in the session and was last marked flat at 103.39 against a basket of six global currency peers.Inflation pressures have notably eased Inflation pressures have eased notably over the past three months, with the Fed's preferred gauge, the PCE Price Index, dipping below the 3% mark for the first time in three years last month. Employment costs, a big drive of wage gains that feed into inflation forecasts, are also slowing, while the level of wage gains earned by job changers fell to the lowest level in two years, according to data from payroll processing group ADP. "The labor market is normalizing after running extremely hot in the last few years," said Bill Adams, chief economist for Comerica Bank in Dallas. "For the Fed, the downshift of private hiring should allay concerns that strong GDP growth in the second half of 2023 might revive inflationary pressures." CME Group's FedWatch is starting to reflect that change, with the odds of a March cut now pegged at 46.7%, but that's down from around 55% prior to the rate decision. The chances of a follow-on cut in May are now trading at 92%, however, and the most optimistic reading for 2024 rate cuts puts the year-end federal funds rate at between 4% and 4.25%, effectively adding two quarter-point reductions from the Fed's forecasts.Related: Veteran fund manager picks favorite stocks for 2024
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Fed pushes back on spring cuts but holds rates steady at 5.25% to 5.5%

The Federal Reserve held its key interest rate steady for a fourth consecutive meeting Wednesday, confirming market forecasts, but the central bank pushed back on the chances of a spring rate cut, warning that inflation remains elevated. The Federal Open Market Committee held its key policy rate at between 5.25% and 5.5%, the highest in 22 years, a move that Wall Street widely expected following the last quarter-point rate hike in July. The timing of any near-term rate cuts was left ambiguous, however, with officials noting a strong labor market, solid economic growth and low unemployment. "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 FOMC said in its regular policy statement. Federal Reserve Chairman Jerome Powell speaks at a news conference after a Federal Open Market Committee meeting in Washington on Nov. 1, 2023. The Fed on Jan. 31, 2024, pushed back on market estimates of a spring interest-rate cut. Photographer: Al Drago/Bloomberg via Getty Images Bloomberg/Getty Images "In assessing the appropriate stance of monetary policy, the Committee will continue to monitor the implications of incoming information for the economic outlook," the statement added. "The Committee would be prepared to adjust the stance of monetary policy as appropriate if risks emerge that could impede the attainment of the Committee's goals."Federal Open Market Committee statement: https://t.co/pmhmWCDMU2 #FOMC— Federal Reserve (@federalreserve) January 31, 2024 U.S. stocks extended declines immediately following the Fed decision and ahead of Chairman Jerome Powell's question-and-answer session with the media. The S&P 500 was marked 44 points lower, or 0.9%, on the session while the Dow Jones Industrial Average was down 45 points. The tech-focused Nasdaq was marked 232 points, or 1.5%, lower. Benchmark 10-year Treasury note yields rose 3 basis points to 3.981% following the interest rate decision while 2-year notes fell 21 basis points to 4.479%. The U.S. dollar index, meanwhile, gave back most of its declines from earlier in the session and was last marked flat at 103.39 against a basket of six global currency peers.Inflation pressures have notably eased Inflation pressures have eased notably over the past three months, with the Fed's preferred gauge, the PCE Price Index, dipping below the 3% mark for the first time in three years last month. Employment costs, a big drive of wage gains that feed into inflation forecasts, are also slowing, while the level of wage gains earned by job changers fell to the lowest level in two years, according to data from payroll processing group ADP. "The labor market is normalizing after running extremely hot in the last few years," said Bill Adams, chief economist for Comerica Bank in Dallas. "For the Fed, the downshift of private hiring should allay concerns that strong GDP growth in the second half of 2023 might revive inflationary pressures." CME Group's FedWatch is starting to reflect that change, with the odds of a March cut now pegged at 46.7%, but that's down from around 55% prior to the rate decision. The chances of a follow-on cut in May are now trading at 92%, however, and the most optimistic reading for 2024 rate cuts puts the year-end federal funds rate at between 4% and 4.25%, effectively adding two quarter-point reductions from the Fed's forecasts.Related: Veteran fund manager picks favorite stocks for 2024
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