Fed Sidesteps Inflation Question; Policy Makers Don't Say If Reading Is Low Enough But Damp Rate-Cut Hopes
WASHINGTON -- With the nation's underlying inflation falling, the Federal Reserve yesterday softened its hawkish inflation stance a bit while squelching any suggestion it might cut interest rates soon.</br></br>The central bank, in the statement issued at the end of its two-day meeting, sidestepped the question of whether the current inflation rate is low enough. It emphasized that the outlook for inflation -- and not the latest inflation reading -- is now driving its interest- rate decisions. On that score, the Fed reiterated that its "predominant policy concern remains the risk that inflation will fail to moderate as expected."</br></br>As widely expected, the Fed's policy-making Federal Open Market Committee left its short-term interest-rate target at 5.25%, where it has been for almost exactly a year.</br></br>In the accompanying statement, it said, that "readings on core inflation," which excludes food and energy, "have improved modestly in recent months," a more optimistic assessment than at its last meeting, on May 9, when it said "core inflation remains somewhat elevated."</br></br>But it added: "Sustained moderation in inflation pressures has yet to be convincingly demonstrated. Moreover, the high level of resource utilization has the potential to sustain those pressures."