Investing.com - The Federal Reserve left interest rates unchanged on Wednesday, sticking with its wait-and-see approach as inflation continued to run below target. But Fed Chairman Jerome Powell cooled investor expectations for a rate cut, prompting a selloff across stocks.
The Dow Jones Industrial Average fell 0.61%, the S&P 500 lost 0.75%, while the Nasdaq Composite fell 0.57%.
“We do think our policy stance is appropriate right now. We don’t see a strong case for moving in either direction,” Powell said during a news conference after the central bank’s policy meeting.
The remarks from Powell comes as calls for a rate cut intensify, with U.S. President Donald Trump suggesting on Tuesday that a 1% cut to rates was needed.
The Federal Open Market Committee left its overnight funds rate in a range of 2.25% to 2.5%. The unchanged decision on rates was widely expected as tame domestic inflation and speed bumps in the global economy persist.
"On a 12-month basis, overall inflation and inflation for items other than food and energy have declined and are running below 2 percent," the Fed said in in its statement.
The most recent measure of core PCE, the Fed's preferred measure of inflation, showed a slowdown to a rate 1.6%, well below the central bank's 2% target.
Ahead of the rate decision, about 97% of traders expected the Fed to keep rates unchanged, according to Investing.com's Fed Rate Monitor Tool.
Overall, Fed members continued to view sustained expansion of economic activity, strong labor market conditions, and inflation near the Committee's symmetric 2 percent objective as the "most likely outcomes."
The Fed said economic activity rose at a "solid rate," but acknowledged that the growth of household spending and business fixed investment slowed in the first quarter.
The U.S. economy grew at a 3.2% annualized rate, above the 2.2% pace in the final three months of last year, but the rebound was driven by temporary factors.
Ahead of the crucial nonfarm payrolls report due Friday, the central bank continued to highlight the strength in the labor market. "Job gains have been solid, on average, in recent months, and the unemployment rate has remained low," the Fed said.