2023-09-20 20:48:40
The US Federal Reserve maintained its rates at their current level on Wednesday. But it anticipates an additional increase by the end of 2023 and a higher level than expected in 2024, while it expects GDP growth to be doubled compared to its previous forecast.
The Monetary Policy Committee (FOMC) maintained its main key rate in the range of 5.25 to 5.50%, where it was following being raised at the end of July, during the last meeting. This is the highest level since 2001. This decision was made unanimously by FOMC members.
However, this is not the end of the cycle: officials at the American central bank anticipate an additional increase by the end of 2023. And they see them falling less quickly than expected, since they should still be 5 .1% in 2024, compared to 4.6% anticipated in their previous forecasts published in June.
Robust economy
Because the Fed observes that the economy is doing much better than expected. It doubled its forecast for growth in gross domestic product (GDP) of the United States for 2023, forecasting 2.1% once morest only 1.0% in June.
The American economy is “progressing at a solid pace”, noted the Fed in the press release published at the end of its meeting. During its previous meeting, at the end of July, it reported a “moderate pace”. And for 2024, the Fed anticipates 1.5% growth, compared to 1.1% in previous forecasts.
Need some time
Inflation forecasts remain essentially the same as in June, at 3.3% for this year (compared to 3.2% previously), then 2.5% in 2024 (same as June), and 2.2% in 2025 (compared to 2.1%). “It will still take time to bring inflation sustainably to 2.0%,” said Fed Chairman Jerome Powell.
The situation seems to be gradually rebalancing on the job market, following two years of labor shortage, which caused wages to soar. The unemployment rate rose to 3.8% in August, due to an influx of new workers, which might help cool inflation.
Concerns
As for consumption, the engine of American economic growth, particularly vigorous since the start of the Covid-19 crisis, it seems to be showing first signs of weakness.
Another threat is that of “shutdown”, a paralysis of the federal administration, if Republicans and Democrats in Congress do not agree on the government budget by the end of the month.
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