Federal Reserve not yet confident enough to cut rates, but sees progress

Central bankers in the U.S. said they were now closer to achieving their goals for both full employment and inflation stability.

Members of the Federal Open Market Committee added that they were still not confident enough that inflation was shifting back down to 2% on a sustainable basis.

Until they were, the FOMC, the Federal Reserve's main policy organ, probably should not cut rates, they said in their policy statement.

However, the reference to the possible need for further rate hikes was removed.

Indeed, during his press conference, Fed chairman Jerome Powell said he believed that everyone on the committee believed that rates would be cut in 2024, but the timing was yet to be determined.

The FOMC also said that the central bank would continue shrinking its balance sheet at the same pace.

Regarding the current level of core PCE inflation in annual terms, Powell said it remained well above the Fed's 2.0% target and that there remained a ways to go, but that it had come way down from where it was.

Also of interest, the Fed chief said that the monetary authority could not just cut rates mechanistically in response to lower inflation so that real interest rates did not rise as result.

One particular risk to guard against was inflation settling at a rate higher than its target, the chairman said.

In response to Powell's remarks, as of 1954 GMT the yield on the policy-sensitive two-year U.S. Treasury note was trading 12 basis points lower at 4.217%.

Wall Street 's main market gauges on the other hand were still bumping along near their session lows, in part due to the drag from technology giants Microsoft and Alphabet follower their quarterly numbers.

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