Fed Chair Jerome Powell talks inflation and labor market after leaving rates unchanged

Summary

• Federal Reserve leaves the target range for the federal funds rate unchanged at 3.5-3.75%.
• The current stance of monetary policy is seen as appropriate to continue progress toward the dual mandate of maximum employment and 2% inflation.
• U.S. economic activity is expanding at a solid pace, with resilient consumer spending and continued business fixed investment, though housing sector activity remains weak.
• The median FOMC participant projects Real GDP growth of 2.4% in 2024 and 2.3% in 2025, slightly stronger than December's projections.
• The labor market shows a 4.4% unemployment rate with little recent change; job gains have been low, reflecting both softer labor demand and lower labor force growth.
• Inflation has eased significantly from mid-2022 highs but remains elevated, with recent PCE and core PCE readings at 2.8% and 3.0%, respectively, over the 12 months ending in February.
• Elevated inflation readings are partly attributed to goods sector inflation, boosted by the effects of tariffs.
• Near-term inflation expectations have risen recently, likely reflecting higher oil prices due to supply disruptions in the Middle East, though longer-term expectations remain anchored at 2%.
• The SEP median projection for the federal funds rate is 3.4% at the end of 2024 and 3.1% at the end of 2025, unchanged from the December projections.
• The Fed emphasizes that monetary policy is not on a pre-set course and decisions will be made on a meeting-by-meeting basis, with the path dependent on incoming data.
• Significant uncertainty surrounds the economic implications of developments in the Middle East, particularly regarding the scope and duration of higher energy prices' effects on inflation.