Fed leaves interest rates unchanged amid inflation rate higher than 2% target

May 1 (UPI) -- The Federal Reserve Wednesday voted to keep interest rates unchanged, in line with expectations as inflation remains above the central bank's 2% threshold.

The Federal reserve's Federal Open Market Committee said in a statement that the central bank left interest rates for overnight bank borrowing within a range of 5.25%-5.5%.

With CPI inflation at 3.5%, the FOMC said, "In recent months, there has been a lack of further progress toward the Committee's 2% inflation objective."

Despite inflation's persistence, it has dropped dramatically from a high point of 9.1% annually to 2.7% as measured by the personal consumption expenditures or PCE index.

The U.S. Bureau of Labor Statistics said seasonally unadjusted Consumer Price Index inflation was 3.5% in March compared to the last 12 months.

Economists speaking to ABC News have indicated that sustained consumer spending is maintaining stable economic growth despite the lower-than-expected GDP growth reported last week.

GDP grew by just 1.6% in the first quarter of 2024 triggering a Dow Jones drop of 629 points. Dow economists had expected GDP to grow by 2.4%.

Overall, economists indicated the recent inflation data would see the Fed keep interest rates in place once again.

"Pretty much everybody on the FOMC is talking from the same script right now. With maybe one or two exceptions, policymakers pretty universally agree that the last few months of inflation data are too warm to justify action in the near term. But they're still hopeful that they will be in a position to cut rates later," economist Guy LeBas with Janney Montgomery Scott, told CNBC.

While economists and markets have been anticipating rate cuts by the Fed, those are not likely now until November, according to the CME Group's Fed Watch Tool.

In March, Fed Chair Jerome Powell said the FOMC remains confident that inflation will fall to 2%, but the Fed will wait until economic data shows that inflation level before deciding to cut rates.

According to Powell, U.S. inflation had nine months of 2.5% inflation before January 2024. In March he said progress is being made bringing inflation down and said he anticipates three interest rate reductions by the end of the year, as economic data allows.