The Fed is winning its battle against inflation. So why isn’t it cutting rates?

Legendary baseball coach and player Frank Robinson famously said, “Close only counts in horseshoes and hand grenades.” The Federal Reserve is living by that precept.

Legendary baseball coach and player Frank Robinson famously said, “Close only counts in horseshoes and hand grenades.” The Federal Reserve is living by that precept. After getting its preferred inflation gauge down from over 7% in June 2022 — its highest level since the early 1980s — to its current reading of 2.7%, you’d think central bankers would be breathing a sigh of relief. And yet, they’re likely doing anything but that at their June two-day monetary policy meeting, which kicks off on Tuesday. Officials are all but certain to leave rates unchanged regardless of the forthcoming May Consumer Price Index report set to be released Wednesday at 8:30 am ET, just hours before the Fed’s decision is announced. “Of course we’re not satisfied with 3% inflation,” Fed Chair Jerome Powell told reporters after last month’s policy meeting, adding that “3% can’t be in a sentence with satisfied.” Powell and his colleagues at the Fed will not budge on 2%. And until they’re convinced inflation is on a sustainable path to that level, rate cuts won’t be on the table — unlike many central banks abroad that have recently begun the process. There are good reasons for the Fed’s stubbornness, though.