June 13, 2024
New Delhi, India
US Fed
The US Federal Reserve, led by Chair Jerome Powell, has announced that it will keep the benchmark interest rates unchanged at 5.25-5.50% for the seventh consecutive meeting. This decision comes as the Fed aims to control inflation while maintaining steady economic growth.
Key Highlights of the Fed’s Decision
- Interest Rates Unchanged: The Fed has kept interest rates at the 23-year high mark of 5.25-5.50%, in line with Wall Street expectations.
- Inflation and Rate Cuts: The Fed foresees only one rate cut in 2024, with more potential cuts in 2025, contingent on economic data. Policymakers stress that rate cuts will not occur until inflation moves sustainably towards the 2% target.
- Inflation Forecast: The Fed raised its core inflation forecast for 2024, reflecting ongoing price pressures.
- GDP Projections: The GDP projections remain unchanged from previous forecasts.
- Consumer Prices: US consumer prices were flat in May compared to April, with the annual rate of inflation slowing to 3.3% from 3.4%. The core consumer price index (CPI), excluding food and energy, rose at a year-over-year rate of 3.4%, the slowest pace in over three years.
Context and Implications
Since March 2022, the Federal Reserve has increased the policy rate by 5.25 percentage points in one of the most rapid responses to rising inflation. However, since July 2023, the Fed has held the policy rate steady to curb high inflation and gradually bring it down towards the 2% target.
The decision to hold rates steady reflects a cautious approach by the Fed, balancing the need to control inflation while avoiding a potential economic slowdown. The next FOMC meeting is scheduled for July 30-31, where further policy decisions will be deliberated.
Also Read: Currency Market Analysis June 13, 2024: Rupee Weakens as Strong US Labor Data Lifts Dollar
Future Projections
Fed policymakers have indicated that future rate changes will depend on economic data, particularly regarding inflation and economic growth. The Fed plans to slow down the pace of balance-sheet runoff starting in June 2024, indicating a more measured approach to monetary policy in the coming months.
The Fed’s commitment to data-dependent decisions highlights the uncertainty in the economic outlook, with inflation trends and GDP growth being critical factors influencing future rate adjustments.
In conclusion, the US Federal Reserve’s decision to maintain the current interest rates underscores its strategy to manage inflation while supporting economic stability. Investors and policymakers will closely watch upcoming economic indicators as the Fed prepares for its next meeting in late July.
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