Fed keeps rates at 4.25%-4.50% as Powell says cuts await clearer inflation progress

The U.S. Federal Reserve left its benchmark interest rate unchanged at 4.25% to 4.50% after its latest policy meeting, signaling that borrowing costs are likely to stay elevated until inflation shows more convincing signs of easing.

In its statement, the central bank pointed to inflation that remains above its 2% target and said it needs greater confidence that price pressures are moving sustainably lower before considering any rate cuts. Fed Chair Jerome Powell reinforced that message, saying reductions are not imminent and that policymakers want clearer evidence of disinflation before changing course.

The decision reflects the Fed’s continued balancing act between supporting economic growth and preventing inflation from becoming entrenched. While recent data have suggested some cooling in price pressures, officials remain cautious about declaring victory too soon.

Financial markets reacted modestly to the announcement. The S&P 500 slipped 0.3% as investors adjusted expectations for the timing of future easing, while the U.S. dollar strengthened slightly against major currencies. Traders now appear to be betting that the Fed will keep rates at current levels for longer than previously hoped.

The central bank’s next moves will depend heavily on upcoming inflation and labor market data, which will help determine whether policymakers gain the confidence needed to begin cutting rates later this year.