What to Watch for at Today’s Fed Meeting on Interest Rates

Federal Reserve officials left interest rates unchanged and signaled wariness about the recent pace of inflation, a hint that they may keep borrowing costs high for longer.

The Fed concluded its two-day policy meeting Wednesday, releasing a statement that included a few important changes from the last one in March. Central bankers reiterated that they need “greater confidence” that inflation is coming down before reducing interest rates from 5.33 percent, where officials have held them since July.

“In recent months, there has been a lack of further progress toward the committee’s 2 percent inflation objective,” the statement added.

Jerome H. Powell, the Fed chair, will hold a news conference at 2:30 p.m., which will likely provide investors and economists with more details about how the Fed is thinking about the economy at a complicated juncture.

After months of rapid cooling, inflation has proved surprisingly sticky in early 2024. The Fed’s preferred inflation index has made little progress since December, and although it is down sharply from its 2022 highs it remains well above the Fed’s 2 percent goal — calling into question how soon and how much officials will be able to lower interest rates.

Mr. Powell could also face questions about another piece of news from Wednesday’s Fed release. Officials announced a plan to shrink their balance sheet of bond holdings more slowly. The Fed’s balance sheet exploded in size as the central bank snapped up securities during the pandemic, and officials have paring it down for months now by allowing securities to mature without reinvesting the proceeds.

By making that process more gradual, officials hope that they will be able to reduce their footprint in financial markets without risking a market rupture. Officials had hinted that a balance sheet plan was coming, so the focus of the news conference is likely to remain on the state of the economy and the outlook for interest rates.

Fed officials expected to make three interest rates cuts in 2024 as recently as March, but inflation’s recent stubbornness has made that look less likely. Many economists have begun to push back their expectations for when rate reductions will begin, and investors now expect only one or two this year. Odds that the Fed will not cut rates at all this year have increased notably.