The U.S. Federal Reserve is keeping interest rates steady and says risks are becoming more balanced.
The U.S. central bank’s latest policy statement gave no indication that a rate cut was imminent, and in fact the Federal Open Market Committee, which sets policy, said it would “keep its target range open until we have greater confidence that inflation will fall.” “We do not anticipate that reducing it will be appropriate,” he said. The Fed’s inflation target is to move sustainably toward 2%.
“Inflation eased last year but remains on the rise,” the Federal Reserve said in a statement after the two-day meeting, adding, “Officials are paying very close attention to inflation risks.”
The language will be a blow to investors who were expecting rate cuts to begin as early as March.
But the Fed also nodded to concerns about the employment aspect of its mandate and opened the door to lowering policy rates if inflation, as expected, remains low in the coming months.
The Fed said the risks of achieving both its employment and inflation targets were “better balanced.” This caps a roughly two-year period in which central banks were focused on raising interest rates and risks were tilted by rising prices. “In considering adjustments to the federal funds rate target range, the Committee will carefully evaluate incoming data, the evolving outlook, and the balance of risks,” the FOMC said. The Fed’s previous statement, released on December 13, is as follows: It presented conditions under which ‘additional policy consolidation’ could be considered, excluding consideration of interest rate cuts.
No direction for investors
The Fed’s latest statement, which kept the benchmark overnight interest rate in the range of 5.25% to 5.50%, was unanimously approved. Federal Reserve Chairman Jerome Powell is scheduled to hold a press conference at 2:30 PM EST to detail his policy decisions and economic outlook.
While the statement failed to guide investors and the public on the timing and pace of future rate cuts, it marked the current policy rate as the peak of a cycle of aggressive monetary tightening that began in March 2022 when price pressures were rising. Inflation reached a 40-year high a few months later.
Inflation is currently below the Federal Reserve’s target every seven months, while U.S. economic growth and the job market remain broadly unchanged.
The Federal Reserve said Wednesday that economic activity is “expanding at a robust pace.” Job growth “remains strong and unemployment remains low.”
Federal Reserve officials did not release any new economic forecasts at this week’s meeting. At the December 12-13 meeting, policymakers planned to cut policy rates by 75 basis points over the course of the year, but were reluctant to confirm a start date until more data showed inflation continuing to trend lower. .
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