Interest rates are being held steady by the US Federal Reserve, which provides little insight into when further cuts in borrowing costs may occur in a country where growth is ongoing and inflation is on track.
At the conclusion of its most recent two-day meeting on Wednesday, the Fed made its decision.
The US central bank changed its recent policy statement’s claim that inflation “has made progress” toward the Fed’s 2 percent inflation goal, noting that only that the rate of price increases “remains elevated” after several months of inflation data moving largely sideways.
Recent significant inflation readings are still at or above the Fed’s target of 50% or more.
Fed officials say they largely believe that the rate will resume this year despite holding off on rates while awaiting data to confirm that.
“Economic activity has grown steadily,” he continued. The unemployment rate has stabilized at a low level in recent months, and labour market conditions remain solid”, the central bank’s policy-setting Federal Open Market Committee (FOMC) said in a statement.
The Committee will carefully assess incoming data, the changing outlook, and the balance of risks in light of the extent and timing of additional adjustments to the target range for the federal funds rate, it said.
The Fed is now holding its own as officials wait for more inflation and job data as well as information on the impact of President Donald Trump’s policies as a result of the unanimous decision to keep the overnight interest rate at the current 4.25 percent to 4.5% range in addition to the new statement.
Short-term interest rate futures revealed that investors anticipate the central bank to hold off on rate cuts until June, according to the statement’s release. Stocks lost some ground while US bond yields were unchanged.
The Trump administration already has taken steps to deport some undocumented immigrants and temporarily halt federal spending, and it may also have plans to enact new import tariffs on major trading partners like Mexico and Canada as soon as this weekend.
‘ Mildly hawkish ‘
The decision to hold the policy rate steady was widely anticipated following , three consecutive rate cuts , in 2024 that reduced the Fed’s benchmark rate by a full percentage point.
The central bank is debating whether or not further rates may need to be cut, with policymakers predicting two quarter-percentage-point rate cuts over the course of the year.
“The Fed seems to think the economy is stuck with a low unemployment rate and elevated inflation”, said Brian Jacobsen, chief economist at Annex Wealth Management. The statement could be read as mildly hawkish, suggesting that a small blip in rates could cause the economy to fall into this equilibrium.
The FOMC will want to see further progress in the inflation data delivered the next rate cut, highlighted by the removal of the reference on inflation making progress, according to Lindsay Rosner, head of multi-sector fixed-income investing at Goldman Sachs Asset Management.
Source: Aljazeera
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