Fed Holds Rates Steady Amidst Stalled Disinflation, Downplays Likelihood of HikesThe Federal Reserve suggested that interest rates could remain elevated for an extended period due to stagnant disinflation. However, it played down the likelihood of rate hikes following an unchanged rate decision on Wednesday.The Federal Open Market Committee (FOMC) stated that there had been limited progress toward achieving its 2 percent inflation target. As a result, it maintained its benchmark rate within a range of 5.25% to 5.5%.Inflation data over the past few months have exceeded expectations, leading investors to revise their forecasts for rate cuts. According to Investing.com’s Fed Rate Monitor Tool, investors now anticipate only one rate cut this year, significantly lower than the initial estimates of six or seven cuts.During the subsequent press conference, Fed Chairman Powell acknowledged that the recent inflation data could delay the commencement of rate cuts. However, he also ruled out the possibility of initiating rate hikes, stating that "it is unlikely that the next policy rate move would be a hike." Powell highlighted that while inflation progress had stalled in recent months, the data had not provided enough confidence to initiate rate cuts. He suggested that gaining such confidence would take longer than anticipated.Furthermore, the Fed announced plans to gradually reduce its balance sheet, known as quantitative tightening, starting next month. This program, initiated in 2022 to reduce the assets held on its balance sheet, will see a decrease in the monthly pace of Treasury securities roll-off. Beginning in June, the Fed will allow approximately $25 billion in Treasury securities to roll off its balance sheet each month, down from the current pace of $60 billion.Bank of America noted that the $25 billion cap for Treasury roll-off was slightly lower than expected, indicating a marginally slower pace of runoff. However, the justification for this taper was anticipated and did not come as a surprise.