In the most highly anticipated meeting since Jerome Powell took over the Federal Reserve in 2018, the world's most powerful central bank Wednesday indicated for the first time in years that it stands ready to cut interest rates if the economy weakens further.
But for now - it's holding rates steady at 2-1/4 to 2-1/2 percent.
The Fed said solid consumer spending was being offset by weaker business spending and stubbornly low inflation, leading Powell and his colleagues to drop a pledge to remain patient, and hint the Fed's next move is likely to be down, not up.
SOUNDBITE (ENGLISH) FEDERAL RESERVE CHAIRMAN JEROME POWELL, SAYING:
"Thus while the baseline outlook remains favorable, many FOMC participants cited the investment picture and weaker business sentiment and the crosscurrents I mentioned earlier as supporting their judgment that the risks of less favorable outcome has risen."
The Fed has been facing intense pressure from President Trump and financial markets to lower rates as the trade war with China slows down the economy.
Reuters Fed watcher Trevor Hunnicutt:
SOUNDBITE (ENGLISH): TREVOR HUNNICUTT, REUTERS FEDERAL RESERVE CORRESPONDENT, SAYING:
"What the Fed told us is that they are not ready to say anything about a timing of a rate cut, just that they are prepared to think about it. One of the members of the FOMC, one of the voting members James Bullard, actually dissented from the message to keep rates steady. He wanted a cut now but what Powell indicated in his press conference afterwards is that most of the people on the committee do not feel that way. They do not think a cut is imminent."
But investors are now predicting a 99 percent chance the Fed will cut rates in July.
Still, there are several events before that meeting which could determine if the Fed delivers.
At the end of June: Trade talks resume between Trump and Chinese president Xi Jinping...
That's followed by the latest employment report released on July 5th....
and then corporate earnings season kicks off in earnest the week of July 15th.
On July 26th, the first look at second-quarter economic growth is released.
The Fed will have all that information to consider when it meets again at the end of July.
Even if a cut comes in July, the Fed might not be done.
Some members of the Fed predicted two quarter-point rate cuts before the year is done.