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Federal Reserve officials said they are leaving their benchmark rate untouched, noting that progress in taming U.S. inflation has stalled. 

The Fed on Wednesday said it is keeping the federal funds rate in a range of 5.25% to 5.5%, the same level it has held since the central bank's July 2023 meeting, which is its highest level in more than 20 years. Economists had largely expected the decision given that inflation had ticked upward in the first three months of 2024.

Fed Chairman Jerome Powell has repeatedly said the central bank prefers to keep rates high until inflation retreats to about 2% on an annual basis, rather than risking cutting too early and fueling another round of price spikes. Despite the Fed's flurry of interest rate hikes, inflation remains stubbornly high, with March prices rising 3.5% from a year earlier, fueled by higher housing and gasoline prices. 

In a press conference to discuss the central bank's decision, Powell stressed that he's confident inflation will recede to the Fed's target of 2%, although the economy is taking longer to reach that point than policy makers previously expected. Powell also sought to tamp down any concerns the Fed could reverse course in response to persistent inflation, saying it is "unlikely the next policy rate move will be a hike."

Fewer interest rate cuts?

Powell demurred when asked if the Fed continues to cut rates three times in 2024, as it had indicated earlier this year. Instead, he responded that Fed officials need to feel more confident before they move to ease borrowing costs.  

"We said today that we didn't see progress [on inflation] in the first quarter, and I've said that it appears then it'll take longer for us to reach that point," he said, adding, "I don't know how long it'll take."

Wall Street traders now envision just a single rate cut this year to the Fed's benchmark rate. That compares with their expectations at year start that the Fed could cut rates as much as six times in 2024. 

In its Wednesday statement, the Fed reiterated that it won't cut rates "until it has gained greater confidence that inflation is moving sustainably toward 2%."

"Patience is the watchword now for the Fed and the risk of fewer or no rate cuts this year is growing," Brian Coulton, Fitch Ratings' chief economist, wrote in an email after the Fed decision. "[T]he risk of failing to get inflation down on a sustained basis seems to be rising as each week goes by."

He added, "The statement explicitly recognizes the recent deterioration in inflation dynamics," noting that inflation has edged up by some measures in recent months and an uptick in wages during the first quarter, which could boost prices. 

What does the rate decision mean for your money?

Expect to continue to pay high rates to borrow money, noted Jacob Channel, senior economist at LendingTree.

Mortgage rates are likely to remain above 7%, at least in the near term, he added. Credit card rates, which are at record highs, are sure to remain elevated, he noted. 

"Across the board, it's all expensive," Channel said. "The interest rate on a credit card will make the interest rate on a mortgage look minuscule by comparison."

On the bright side, savers are likely to continue to find higher-interest savings accounts, with some offering yields above 5%, according to Ken Tumin, banking expert at DepositAccounts.com. Certificates of deposit and other savings vehicles can also offer robust rates. 

— The Associated Press contributed to this report.

In:
• Jerome Powell
• Consumer News
• Interest Rates
• Inflation
• Federal Reserve

Aimee Picchi

Aimee Picchi is the associate managing editor for CBS MoneyWatch, where she covers business and personal finance. She previously worked at Bloomberg News and has written for national news outlets including USA Today and Consumer Reports.

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