Federal Reserve keeps interest rates unchanged amid ongoing inflation concerns
Date
6/13/2024 5:06:01 AM
(MENAFN) In a widely anticipated decision, the US Federal Reserve opted to keep interest rates unchanged on Wednesday, marking the seventh consecutive time rates have held steady. The interest rates in the world's largest Economy remain fixed between 5.25 and 5.5 percent. This decision comes despite earlier forecasts from March, which suggested that rates might be cut three times within the year. However, Fed officials now expect only a single rate cut in 2024, reflecting a more cautious approach.
The Federal Reserve's latest statement emphasized the need for "more confidence" that inflation rates are decreasing toward the 2 percent target. Despite a noticeable slowdown, inflation remains relatively high. Over the past several months, the Fed has maintained interest rates at their highest levels in 22 years, aiming to curb lending and temper price increases. Although inflation began to slow last year, fostering optimism about imminent rate cuts, the Fed's cautious stance persists.
In its Wednesday report, the Fed adjusted its inflation expectations, predicting a rate of 2.6 percent for this year, an increase from previous estimates. Additionally, the Fed revised its inflation outlook for the next year upward. The report also indicated a potential acceleration in the pace of rate cuts starting in 2025, with expectations of four cuts compared to the previous forecast of three. By 2025, the Federal Reserve’s Monetary Policy Committee anticipates a total of five rate cuts, amounting to a 1.25 percent reduction, a slight adjustment from the six cuts projected in March.
The Fed's internal dynamics reveal a growing caution, with four officials on the Monetary Policy Committee now opposing any rate cuts this year, up from two in the previous meeting. This shift underscores the heightened vigilance among policymakers amid ongoing inflationary pressures. In a related development, the core inflation index in the United States fell to 3.4 percent annually in May, marking the second consecutive month of decline and exceeding expectations. This decrease, however, has not yet provided sufficient reassurance to prompt an immediate change in the Fed’s cautious monetary policy stance.
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