Near the end of last year, Federal Reserve Chairman Jerome Powell was waxing optimistic about the direction of the U.S. economy and signaled 2024 could see a series of down adjustments to the monetary body’s benchmark federal funds rate.
But that rosy glow has faded somewhat as the first months of the year have seen inflation bucking a steady downward trend that was in play for most of 2023 and has instead been back on the rise.
And at the conclusion of the Fed’s policy meeting on Wednesday, Powell said that inflationary persistence helped push the body’s Open Market Committee to support standing pat on the 5.25% to 5.5% interest rate range that has been in play since last July and is the highest in over two decades.
“In recent months, inflation has shown a lack of further progress toward our 2% objective,” Powell said at a Wednesday press conference. “It is likely that gaining greater confidence will take longer than previously expected.”
The most recent data from the U.S. Labor Department found annual inflation in March came in at 3.5%, a rate that outpaced most economists’ expectations and one mostly driven by upticks in the costs of shelter and gasoline.
Core inflation, which strips out volatile food and energy prices, rose .4% on a monthly basis in March, matching the increases over the first two months of the year and hitting a 3.8% annual rate.
When will the Fed make a move on rates?
“Inflation is still too high,” Powell told reporters on Wednesday. “Further progress in bringing it down is not assured and the path forward is uncertain.”
Interest rate adjustments are the Fed’s primary weapon in an ongoing battle against the elevated prices of consumer goods and services. While the monetary body has paused making any rate adjustments since its July 2023 meeting, it had imposed 11 increases going back to March 2022, the most aggressive series of rate hikes in decades.
The rate increases raise the cost of debt for businesses and consumers, a move that aims to reduce the amount of spending and overall economic activity. That shift in dynamics typically leads to lower inflation rates.
Earlier this year, Utahns registered their collective pessimism over what direction the economy will be headed in 2024.
When asked, “Looking ahead, how are you feeling about the economy in the coming year?” in a statewide poll conducted in late January by the Deseret News in partnership with the Hinckley Institute of Politics, 52% of respondents said they were somewhat or very pessimistic, 43% reported being somewhat or very optimistic, and 6% said they didn’t know.
And in a follow-up question asking poll participants how concerned they currently were about inflation, 87% said they were somewhat or very concerned, 11% said they were not very or not at all concerned, and 2% weren’t sure about their feelings.
Republican poll participants were less optimistic than Democrats in their feelings about the economy in the coming year, 39% to 54%, respectively, and more concerned about inflation, 89% to 77%.
In the poll, respondents with lower incomes were more down on the economic outlook than those with higher incomes. Younger residents, too, expressed more pessimism than older residents.