As expected, officials did not change the rates

However, it added that there are no plans to cut rates as inflation is still above the central bank's target. The report also provided limited guidance on whether it was hiking, outlining only the factors that go into “adjusting” the policy.

“The Committee does not expect it to be appropriate to lower the target range until there is greater confidence that inflation is moving steadily towards 2 percent,” the statement said.

Although the report summarized factors policymakers should consider when evaluating policy, it did not explicitly rule out higher increases. A significant change is the removal of the lagged effects of monetary policy. Officials mostly believe it will take at least 12 to 18 months for the fix to take effect.

“The Committee will carefully assess incoming data, the evolving outlook and the balance of risks in considering any changes to the target range for the federal funds rate,” the statement said. That language changed a number of factors, including “the overall tightening of monetary policy, setbacks affecting economic activity and inflation, and economic and financial developments.”

Those changes are part of a shift in which the Fed seeks to chart a trend when inflation data points move lower while economic growth is resilient.

The report pointed to economic growth as “solid” and an improvement in inflation.
The FOMC missive said “the risks to the Committee's achievement of its employment and inflation targets are moving toward a better balance.” “The economic outlook remains uncertain, and the team remains very mindful of inflation risks.”

A key clause left out of the statement specified “the extent of any additional policy commitment” that might come. Some Fed watchers were looking for language to emphasize that additional rate hikes are unlikely, but the statement left the question somewhat open.

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Heading into the meeting, markets expected the Fed to start cutting its benchmark overnight borrowing rate in March, with May also a possible starting point.

However, policymakers are cautious about their intentions, cautioning that there is no need to move too quickly as the data emerges. Committee members in December hinted at the possibility of three-quarter percentage point rate cuts this year, less ambitious than the six that futures markets are pricing in, according to the CME Group.

And immediately, the committee, for the fourth consecutive time, voted unanimously not to raise the Fed funds rate. The key rate is targeted at a range between 5.25%-5.5%, the highest in nearly 23 years.

Expect Fed Chairman Jerome Powell's news conference at 2:30 PM ET. Immediately after the decision, stock markets fell marginally.

The central bank is riding the wave of inflation, a strong labor market and solid economic growth, giving it room to ease monetary policy and be cautious about re-accelerating growth and raising prices again. Along with the 11 rate hikes that have allowed the Fed to roll over its bond holdings, it has shaved more than $1.2 trillion off the Fed's balance sheet.

The report indicated that the balance sheet run will continue to accelerate.

Many economists now accept a soft-intermediate narrative, where the central bank can reduce inflation without torpedoing economic growth.

Separate reports on Wednesday indicated the labor market was softening, but wages were falling. Payroll processing firm ADP reported that private firms added just 107,000 new workers in January, falling short of market expectations but still pointing to an expanding labor market. Also, the Labor Department reported that wages, a measure the central bank closely monitors for signals of inflation, rose just 0.9% in the fourth quarter, the smallest increase since the second quarter of 2021.

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More broadly, inflation as measured by core personal consumption expenditures rose 2.9% in December, the lowest since March 2021. On a six- and three-month basis, core PCE prices both ran at or below the Fed's target.

In a separate matter, the central bank also announced changes to its investment policy for senior officers and employees. The changes expand the scope of those who have access to “confidential FOMC information” to include anyone who has access to it, and some staffers may be required to submit brokerage statements or other documents to verify the accuracy of disclosures, he said.

The changes come at a time when the central bank was making major policy changes in the early days of the Covid pandemic, following a controversy over several central bank officials trading from private accounts.

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