Inflation Has Eased, But Is Still Elevated, Powell Says

Summary

• The Federal Reserve (FOMC) voted to maintain the target range for the federal funds rate at 5.25-5.50%.
• Inflation has eased significantly from its 2022 highs but remains elevated above the Fed's 2% longer-run goal.
• Key data points: Total PCE inflation was 2.8% for the 12 months ending February; Core PCE inflation was 3.0%.
• Elevated inflation is attributed largely to the goods sector, which is being boosted by the effects of tariffs.
• Near-term inflation expectations have risen recently, likely due to substantial oil price increases caused by Middle East supply disruptions.
• Most longer-term inflation expectations remain anchored with the 2% goal.
• The median FOMC projection for total PCE inflation was revised up to 2.7% for this year and 2.2% for next year.
• The committee had previously lowered the policy rate by 75 basis points, bringing it within a range of plausible estimates of neutral.
• Policy decisions continue to be guided by the dual mandate of maximum employment and stable prices.