Fed holds rates steady as inflation casts doubt on future cuts

The Federal Reserve on Wednesday held interest rates steady for the sixth straight time after a string of disappointing inflation readings dimmed the odds of cuts later this year.

The widely expected decision – which left interest rates unchanged at a range of 5.25% to 5.5%, the highest level in 23 years – comes amid signs that progress on inflation is stalling, or even starting to reverse.

In their post-meeting statement, policymakers left the door open to rate cuts but stressed they need "greater confidence" inflation is coming down before easing policy.

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

While inflation has fallen considerably from its peak, progress has largely flatlined since the summer. The Fed's favorite gauge shows that inflation is running at a 2.7% pace – well above the central bank's 2% goal. When excluding food and energy, underlying core inflation came in even hotter at 2.8%.

"In particular, readings on inflation have come in above expectations," Chair Jerome Powell told reporters at a press conference in Washington. "It is likely that gaining such greater confidence will take longer than previously expected."