Watch Live: Chair Jerome Powell speaks after Federal Reserve rattles markets with higher rate outlook

Fed Chairman Jerome Powell said he doesn’t see a rate cut until inflation comes down meaningfully and significantly, and that can take a couple of years.

“It will be appropriate to cut rates at such time as inflation is coming down really significantly. And again, we’re talking about a couple of years out,” Powell said. “As anyone can see, not a single person on the committee wrote down a rate cut this year, nor do I think it is at all likely to be appropriate.”

— Yun Li

Investors anticipate a 61.5% chance of the Federal Reserve hiking rates by a quarter point at its July 25-26 meeting, according to the CME FedWatch Tool.

The metric hasn’t moved much since Tuesday, even as the central bank indicated in its dot plot on Wednesday that two more rate hikes are coming up.

Earlier in his press conference, Fed Chair Jerome Powell indicated that the central bank hasn’t made a decision about next month’s policy move, but that it “came up” in this latest meeting “from time to time.”

–Darla Mercado, Jeff Cox

Fed Chair Jerome Powell was reluctant to describe the decision to hold rates steady as a “skip” during Wednesday’s press conference.

“The skip — I shouldn’t call it a skip — the decision,” Powell said at one point.

However, he did not push back on a question that described the decision as a “skip.”

— Jesse Pound

The Fed’s decision to skip an interest rate hike is definitely “hawkish,” said Steve Wyett, chief investment strategist at BOK Financial.

Wyett pointed to what he called “clear communication of more rate hikes coming and no capitulation on the idea the Fed wants to see an ‘economic landing.””

And he said the statement sends a clear message: “We are not done yet.” The Fed will continue to watch how the labor market moves for insights that can then help the central bank decide how to move interest rates going forward, he said.

— Alex Harring

The Federal Reserve’s June “dot plot,” an outlook for rate policy, indicated that additional interest rate hikes are coming – and that could become a stumbling block for stocks, according to eToro’s Callie Cox.

“This new dot plot could also trip up markets given the type of stocks that have rallied lately,” the investment analyst said. “Persistently high rates could tighten the vise on the economy and weigh on growth further. And based on history, the Fed may be content to keep rates high for a long time, even if they don’t necessarily keep hiking.”

She added that in the last three rate hiking cycles, the central bank has waited at least seven months after the last rate increase to begin trimming rates.

–Darla Mercado

Fed Chairman Jerome Powell expressed optimism about the fight against inflation, saying that various factors are showing progress.

“I would almost say that the conditions that we need to see in place to get inflation down are coming into place,” the central bank leader said at his post-meeting news conference.

He further defined that progress as “growth meaningfully below trend. That would be a labor market that’s loosening. It will be goods, pipelines, getting healthier and healthier … The things are in place that we need to see. But the process of that actually working on inflation is going to take some time.”

Powell also noted that he expects disinflation to come from the housing market, where he expects new rental lease prices to come down.

—Jeff Cox

The major averages recovered sharply during Federal Reserve Chair Jerome Powell’s press conference, where he noted that the central bank would consider the cumulative impact of hikes at future meetings.

The S&P 500 recovered to flat, while the Nasdaq Composite gained 0.2%. The Dow Jones Industrial Average trimmed losses to a 257-point decline, or 0.7%. Earlier, it fell more than 400 points.

The earlier sell-off was spurred by the Fed’s forecast for additional rate hikes this year, even as the central bank held rates steady for June.

–Darla Mercado

Fed Chair Jerome Powell said that, while a decision about next month’s policy move hasn’t yet been made, central bank officials discussed it.

“We didn’t we didn’t make a decision about July,” Powell told reporters after the Fed held rates steady but signaled more rate hikes may be coming later this year. “Of course it came up in the meeting from time to time, but really the focus was on what to do today. I would say … two things: One, a decision hasn’t been made. Two, I do expect that it will be a live meeting.”

— Fred Imbert, Jeff Cox

The Federal Reserve will consider the impact that its previous rate hikes are having on the economy when deciding whether or not to hike rates again in the future, Chair Jerome Powell said.

“Nearly all committee participants expect that it will be appropriate to raise interest rates somewhat further by the end of the year. But at this meeting, considering how far and how fast we’ve moved, we judged it prudent to hold the target range steady. … The committee will take into account the cumulative tightening of monetary policy, the lags with which monetary policy effects economic activity and inflation, and economic and financial developments,” Powell said.

— Jesse Pound

Fed Chairman Jerome Powell kicked off his news conference by noting that more than a year’s worth of interest rate hikes haven’t worked their way through the economy yet.

“We have raised our policy interest rate by 5 percentage points, and we’ve continued to reduce our security holdings at a brisk pace. We’ve covered a lot of ground and the full effects of our tightening have yet to be felt,” he said.

“We have been seeing the effects of our policy tightening and demand in the most interest rate sensitive sectors of the economy, especially housing and investment,” he later added. “It will take time however, for the full effects of monetary restraint to be realized, especially on inflation.”

—Jeff Cox

The likelihood of two more interest rate hikes ahead is unsurprising given continued resilience in the economy, according to Whitney Watson, global co-head of fixed income at Goldman Sachs Asset Management.

“Today’s decision to pause on policy actions was consistent with recent labor market and inflation data,” Watson wrote Wednesday.

“But with the economy proving resilient, downside risks from banking stress fading, debt limit uncertainty behind us and inflation still hovering above target, we are unsurprised that the Fed has also hinted that ‘additional policy firming’ may be warranted, with the median projection for the Fed funds rate at the end of the year rising from 5.1% in March to 5.6%.”

— Sarah Min

The Federal Reserve predicted that it would boost interest rates to 5.6% before the year is over, according to the central bank’s forecast.

That adds up to two more rate hikes if the Fed raises by quarter-point increments each time.

Read more about the Fed’s “dot plot” of economic projections here.

–Darla Mercado, Yun Li

Click here to see a comparison of the June Fed statement with May’s.

— Alex Harring

Bond yields moved higher and in some cases turned positive for the day after the Federal Reserve signaled that it could hike rates two more times this year.

The 2-year Treasury yield was last up about 7 basis points on the day to 4.769%. The 10-year Treasury yield was at 3.843%, flat for the session but up from before the Fed announcement.

Yields move opposite of price, and a basis point is equal to 0.01 percentage points.

— Jesse Pound

The S&P 500 and the Nasdaq Composite shed earlier gains and turned negative shortly after the central bank indicated that though it was pausing on a June hike, the “dot plot” showed two more increases are coming.

The S&P 500 dropped 0.6%, while the Nasdaq fell 0.7%. The Dow Jones Industrial Average lost more than 400 points, or about 1.2%.

–Darla Mercado

The central bank is skipping a rate hike at its June meeting, as investors had expected. This move leaves the key fed funds rate steady at a range of 5% to 5.25%.

The Fed indicated that more increases will be coming after this pause, however. The announcement sent stocks lower.

Read the details on the Fed’s decision here.

–Darla Mercado

The May consumer price index report – which showed signs of cooling inflation as the annual rate slowed to 4% — makes it seem more likely that the Fed will hold steady in June. But the door may still be open for further rate hikes, according to BlackRock’s Gargi Chaudhuri.

“Tuesday’s CPI data adds conviction to our expectation that the Fed will hold policy rates steady this month while signaling a ‘hawkish skip,’ keeping the door open for a potential rate hike in the future,” the head of iShares investment strategy, Americas, said.

She pointed out that core services, excluding shelter, moderated to 0.16% month over month from 0.27%, which suggests that wage pressures may be cooling.

“While this significantly reduces the risk that the Fed may have to keep hiking into the 6% range, the data is not enough to conclude that the Fed will ease anytime soon,” Chaudhuri added, noting that core inflation is still high on shelter and used vehicle prices.

–Darla Mercado

The S&P 500 and the Nasdaq Composite were slightly higher as the Fed’s policy announcement approached.

The broad-market index was up by 0.14%, and the tech-heavy Nasdaq ticked up by 0.15% around 1:43 p.m. ET. The Dow Jones Industrial Average was off by 0.45% or 154 points.

Treasury yields slipped slightly, with the rate on the 10-year note at 3.782%, off by nearly 6 basis points. The 2-year Treasury yielded 4.635%, also down by 6 basis points.

West Texas Intermediate crude futures for July inched lower by about 0.4%.

–Darla Mercado

After a string of 10 consecutive rate hikes, the Federal Reserve is expected to hold off on increases – at least for now.

Investors have priced in a near certainty that the central bank will hold steady on its benchmark funds rate, which is currently in a range of 5% to 5.25%, according to the CME FedWatch Tool.

Don’t get your hopes up about the Fed signaling the end of its policy tightening. Indeed, key metrics like May’s consumer price index show that the 12-month pace of inflation slowed to 4%, but it still has a way to go.

Keep an eye out for the central bank’s “dot plot,” where members of the Federal Open Market Committee will share their forecasts of where rates will head next. Fed officials will also update their Summary of Economic Projections, detailing their outlooks for gross domestic product, the unemployment rate and inflation, per the personal consumption expenditures price index.

Read more about the Fed’s key decision here.

–Darla Mercado, Jeff Cox