Watch Fed Chair Powell speak after central bank notes ‘modest’ progress on inflation

Inflation data this year has not yet given the Federal Reserve “greater confidence” that it’s moving closer to the 2% goal, according to Fed Chair Jerome Powell.

“We’ll need to see more good data to bolster our confidence that inflation is moving sustainably toward 2%,” he said.

In the Fed statement, central bank leaders acknowledged that there’s been “modest” further progress on getting price growth down to 2%. Before, the Fed had said there was a “lack of” recent progress.

— Alex Harring

Inflation has eased substantially from its peak but remains too high, Federal Reserve chair Jerome Powell said during his Wednesday press conference.

“Our economy has made considerable progress…the labor market has come into better balance with continued strong job gains and a low unemployment rate,” he said. “Inflation has eased substantially from a peak of 7% to 2.7%, but is still too high. We are strongly committed to returning inflation to our 2% goal in support of a strong economy that benefits everyone.”

The Fed is maintaining its restrictive stance on monetary policy, Powell added.

— Pia Singh

The Federal Reserve will likely keep interest rates elevated as it seeks sustainable progress toward its 2% inflation target, one economist said.

“There’s no denying the progress toward the Fed’s 2% target but the real debate is timeframe. Barring any exogenous shocks, the economy will slowly converge to the Fed’s target,” wrote Jeffrey J. Roach, chief economist at LPL Financial.

“Since parts of the economy are less sensitive to interest rates in this business cycle, the Fed is constrained to keep rates higher for longer,” Roach added.

— Sarah Min

Federal Reserve Chair Jerome Powell began his news conference noting the U.S. economy has made progress toward both of the central bank’s goals: bringing inflation down to 2% and maximizing employment.

“Our economy has made considerable progress toward both goals over the past few years,” Powell said.

“The labor market has come into better balance, with continued strong job gains and a low unemployment rate. Inflation has eased substantially from [about] 7% to 2.7%. But it’s still too high,” he said.

— Fred Imbert

How much Wednesday’s CPI report factored into the Fed’s projections is one of the items traders will be looking for from Powell’s press conference, according to Seema Shah, Chief Global Strategist at Principal Asset Management.

“A key question for Powell will be, did the FOMC know the inflation print before they submitted their projections? If they did, that maybe implies that they need more than three months of softer inflation prints before they can be convinced to cut rates,” Shah said in a note.

— Jesse Pound

The Federal Reserve kept a steady hand on interest rates, but it is calling for just one rate cut in 2024.

The S&P 500 and Nasdaq Composite held on to their gains as of 2:19 p.m. ET, with the broad market benchmark up 1% and the tech-heavy index up nearly 1.8%.

The Dow Jones Industrial Average added about 32 points.

— Darla Mercado

In the Fed statement released Wednesday, central bank leaders acknowledged they had begun seeing “modest” further progress toward the goal of 2% inflation. Click here to see a comparison of the newest and previous statements.

— Alex Harring

The central bank kept its key interest rate unchanged at a range of 5.25% to 5.5%, but took two rate cuts off the table for this year.

The Federal Open Market Committee adjusted its rate forecast to one reduction this year, down from three in March.

“In recent months, there has been modest further progress toward the Committee’s 2 percent inflation objective,” policymakers said in their statement.

Read more from CNBC’s Jeff Cox on the Fed’s latest statement and its outlook for rates here.

— Darla Mercado

The S&P 500 and the Nasdaq Composite rose on Wednesday, buoyed by May’s cooler-than-anticipated consumer inflation report.

At about 1:50 p.m. ET, here is where the major market averages stood. The S&P 500 added about 1%, while the Nasdaq jumped nearly 1.8%. Both indexes touched fresh all-time highs in the session.

The Dow Jones Industrial Average was the laggard, rising about 22 points.

Treasury yields declined, with the rate on the 10-year note falling more than 13 basis points to 4.266%. The rate on the 2-year note slipped nearly 14 basis points to 4.695%. Bond yields move inversely to their prices. One basis point is equal to one one-hundredth of a percent.

— Darla Mercado

May’s consumer price index reading — which was flat on a monthly basis and up 3.3% from a year earlier — boosts hopes for rate cuts from the Federal Reserve, but investors should keep their optimism in check, warns Seema Shah, chief global strategist at Principal Asset Management.

“Today’s soft inflation print eases fears that labor market strength may drive renewed inflation strength and likely reinforces Chair [Jerome] Powell’s conviction that the hot inflation data of Q1 was just a bump in the road,” she said.

“While today’s inflation print keeps a September Fed cut firmly in the picture, it does not reopen the door to a July cut,” she added. “The Fed will need today’s evidence of softer price pressures to be also corroborated in the next few months’ inflation prints before it can be sufficiently confident to ease.”

— Darla Mercado

The Federal Reserve’s rate-hiking campaign has had a notable effect on consumers’ wallets, boosting the yields they earn on savings while also increasing financing costs.

CNBC’s data team compared where rates stood prior to the Fed’s March 2022 meeting — where it began raising rates in this latest cycle — versus last week.

Consumers are shelling out more to cover the interest costs on mortgages, with the rate on the 30-year fixed loan reaching 7.15%, according to Mortgage News Daily. That is compared to the rate of 4.29% just prior to the Fed’s initial move to hike rates. Rates on credit cards have also jumped more than 400 basis points, sitting at 20.68% as of last week, up from 16.34% more than two years ago, per Bankrate.

When it comes to saving, however, consumers’ fortunes have improved. The annual percentage yield on a six-month certificate of deposit is now at 3.406%, up from 0.22% in March 2022, per LendingTree. The higher rates have also been a boon for fixed-income investors, as the 10-year Treasury yield topped 4.4% last week, compared to its rate of just over 2% in March 2022, Refinitiv found.

— Darla Mercado, Nick Wells

Traders will have their focus on the Federal Reserve’s dot plot of interest rate expectations as the central bank concludes its policy meeting.

The dot plot, a quarterly report of where policymakers see the fed funds rate heading, is closely watched by traders.

Earlier, the Fed had indicated three rate cuts for 2024, but given a recent blast of strong jobs reports and other upbeat economic data, many are expecting the forecast to show two reductions.

The central bank’s updates — and its latest rate decision — are coming out just hours after May’s consumer price index reading. On a monthly basis, the headline CPI reading held steady from April, but it rose 3.3% from a year earlier, according to the Bureau of Labor Statistics.

— Darla Mercado, Jeff Cox