Interest rates stay stuck

At this point, the only thing sticker than inflation may be interest rates.

During its May meeting, the Fed voted to hold rates steady at 5.25%–5.50%, where they’ve been since July 2023. “In recent months, there has been a lack of further progress toward the Committee’s 2% inflation objective,” the Fed said in a statement.

“It’s likely to take longer for us to gain confidence that we are on a sustainable path to 2% inflation,” Fed Chair Jerome Powell said during a press conference, the Wall Street Journal reported. Inflation will eventually drop, he said, but his “confidence in that is lower than it was.”

Recent economic indicators have dashed hopes that we’d see several rate cuts this year. GDP grew at a slower-than-expected 1.6% in the first quarter of 2024. In March, core inflation rose for the first time in a year, reaching 3.8%. Meanwhile, job growth surged and compensation increased as well. Now, many investors anticipate only one rate cut in 2024, coming toward the end of the year.

But at least rate hikes are looking like less of a possibility: Powell said it’s “unlikely that the next policy rate move will be a hike,” CNBC reported.

Powell also shook off fears of stagflation. “I don’t really understand where that’s coming from,” he said. Economic growth, he pointed out, was around 3%, while inflation was below 3%. “I don’t see the ‘stag’ or the ‘-flation,’” he added.