Fed Holds Rates Steady, Noting Lack of Progress on Inflation

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“My expectation is that we will, over the course of this year, see inflation move back down,” Mr. Powell said on Wednesday. But he added that “my confidence in that is lower than it was because of the data that we’ve seen.” As the Fed tries to assess the outlook, officials are likely to also keep an eye on momentum in broader economy. Economists generally think that when the economy is hot — when companies are hiring a lot, consumers are spending and growth is rapid — prices tend to increase more quickly. Companies are more likely to raise wages as they compete for workers, and they will try to raise prices to cover their climbing labor costs. Consumers who are earning more are less likely to balk at heftier price tags. Growth and hiring have not slowed down as much as one might have expected given today’s high interest rates. A key measure of wages climbed more rapidly than expected this week, and economists are now closely watching a jobs report scheduled for release on Friday for any hint that hiring remains robust. But so far, policymakers have generally been comfortable with the economy’s resilience. That is partly because growth has been driven by improving economic supply: Employers have been hiring as the labor pool grows, for instance, in part because immigration has been rapid.