The Federal Reserve held interest rates steady on Wednesday and pushed out the start of rate cuts to perhaps as late as December –  despite a key report that showed inflation eased last month more than expected.

In a set of projections that likely removes the prospect of slashing the 23-year high borrowing costs before the Nov. 5 presidential election, Fed officials also repositioned from three, quarter-percentage-point cuts that they had signaled in March to just one.

“We’ll need to see more good data to bolster our confidence that inflation is moving sustainably toward 2%,” Chair Jerome Powell said at a news conference after the Fed meeting ended.

“When we are (more confident), then we can look at loosening policy.”

Powell’s comments came hours after a Labor Department report showed the consumer price index rose at 3.3% year-over-year last month, ticking down slightly from the 3.4% headline rate from April. Economists had expected the CPI to hold steady at 3.4%. Core inflation, which excludes volatile food and energy prices, rose 0.2% — also slightly lower than expected.

“It’s only one reading,” Powell said.

The Dow surged more than 250 points after the CPI data was released but ended in the red, down 35. However, the broader S&P 500 closed above 5,400 for the first time and the tech-heavy Nasdaq Composite also rallied.

“The market cares more than the economy does about whether there are two cuts this year or only one,” said Brian Jacobsen, chief economist at Annex Wealth Management. “The Fed is basically rearranging the rate-cut deck chairs.”

Fed officials noted that in recent months there has been “modest” further progress toward their 2% inflation target. That is a more positive assessment than after the Fed’s previous meeting May 1, when the officials had noted a lack of progress.

Still, the central bank made clear that further improvement is needed. As expected, they kept their key rate unchanged at roughly 5.3%. The benchmark rate has remained at that level since July of last year, after the Fed raised it 11 times to try to slow borrowing and spending and cool inflation after it hit a four-decade high.

The officials’ rate-cut forecast reflects the individual estimates of 19 policymakers. The Fed said eight of the officials projected two rate cuts. Seven projected one cut. Four of the policymakers envisioned no cuts at all this year.

While rate cuts are now seen getting a likely later start than September – and proceeding at a slower pace this year than investors have anticipated – the Fed’s policy rate is seen falling fast next year, with reductions of a full percentage point in both 2025 and 2026.

“What everyone agrees on,” Powell said at his news conference, is that the Fed’s timetable for rate cuts is “going to be data-dependent.”

With Post wires

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