The Federal Reserve just made a decision that stunned financial markets.
Wall Street thought the Fed was going in one direction but Powell had other plans.
And Jerome Powell blindsided Americans with this shocking interest rate decision.
Fed leaves Americans drowning in high interest rates
Jerome Powell and his Federal Reserve cronies dropped a bombshell on working families Wednesday by refusing to lower sky-high interest rates that have crushed homebuyers and credit card holders. The Fed’s decision to keep rates at a punishing 4.25% to 4.5% means Americans will keep paying through the nose while inflation continues eating away at their paychecks.
“The Committee seeks to achieve maximum employment and inflation at the rate of 2 percent over the longer run. Uncertainty about the economic outlook has increased further,” the Fed said in its statement.
Fed Chairman Jerome Powell and the Federal Open Market Committee (FOMC) surprised Wall Street analysts who had been expecting the central bank to announce the first of several rate cuts after previous signals that inflation was cooling.
The Fed’s decision is a harsh reality check for Americans who have been waiting for relief from higher borrowing costs while the economy continues to show signs of resilience.
“Inflation remains somewhat elevated,” the Fed acknowledged in its latest policy statement, indicating the fight against rising prices isn’t over.
The Fed’s decision to keep rates at their current level marks the seventh consecutive meeting without a change. The last time the Fed raised rates was in July 2023, when it hiked the benchmark rate to its current range, the highest level in 23 years.
Powell warns of threats to both sides of the Fed’s mandate
The Fed’s announcement contained a surprising admission that threats to the economy are increasing, with the central bank noting that “uncertainty about the economic outlook has increased further.”
In an ominous sign, the statement warned that “the Committee judges that the risks of higher unemployment and higher inflation have risen.”
This marks a significant shift from previous Fed communications, acknowledging that the central bank is increasingly concerned about a potential economic slowdown while simultaneously worrying that inflation could reaccelerate.
“The Committee will continue reducing its holdings of Treasury securities and agency debt and agency mortgage‑backed securities,” the statement added, confirming that the Fed is sticking with its current quantitative tightening program that further restricts the money supply.
The decision to hold rates steady was unanimous, with all FOMC members including Chair Jerome Powell, Vice Chair John Williams, and the rest of the committee voting in favor of maintaining the current policy stance.
Americans stuck with crushing interest rates until at least summer
The Fed’s decision means that Americans will continue to face higher costs for mortgages, car loans, credit cards, and other borrowed money – potentially for months to come.
Mortgage rates have been hovering near 7%, about double what they were just three years ago, making homebuying increasingly unaffordable for many Americans and slowing the housing market.
Credit card interest rates have soared to record highs, with the average rate now approaching 22%, according to Bankrate data. This has made carrying a balance increasingly expensive for households already struggling with higher costs for everyday items.
The Fed has been fighting inflation since March 2022, when it began its most aggressive rate-hiking campaign since the 1980s. While inflation has come down significantly from its peak of 9.1% in June 2022, progress has stalled in recent months.
“The Committee is strongly committed to supporting maximum employment and returning inflation to its 2 percent objective,” the Fed reiterated in its statement.
For now, Americans will have to continue enduring the Fed’s higher-for-longer interest rate policy, with financial markets now pushing back expectations for rate cuts until at least July or September, according to the CME FedWatch tool.
The Fed’s next policy meeting is scheduled for June 11-12, but few analysts now expect any rate cuts at that meeting given Wednesday’s cautious statement.
As inflation continues to bite into household budgets and interest rates remain elevated, Americans find themselves caught in an economic squeeze that shows little sign of immediate relief.