2024-05-02 18:00:00
“We are not seeing progress in 2% inflation in the first quarter, so we need more time to be sure of a drop in interest rates, expressing the inevitability of a high interest rate and prolonged, the interest rate gap between Korea and the rest of the world.” The United States has remained at 2% for 10 months.
Federal Reserve Chairman Jerome Powell holds a press conference following the US Federal Reserve announced it would freeze its benchmark interest rate on the 1st (local time). Chairman Powell dismissed rumors of an interest rate hike that day, saying that “(the Fed’s) next move will not be an interest rate hike,” but said, “We We need more time to gain confidence in lower interest rates. Washington = AP Newssis
“The next step is unlikely to be an interest rate hike, but it will take more time to gain confidence in lowering interest rates (Jerome Powell, Chairman of the US Federal Reserve).”
The US central bank, the Federal Reserve (Fed), once once more froze the benchmark interest rate at the current annual range of 5.25 to 5.50 percent during the regular meeting of the Federal Committee of the open market (FOMC), on the 1st (local time). This is the 6th consecutive event since September last year. That day, Chairman Powell drew the line that there was no possibility of raising the base interest rate, but he once more made it official that a period of lower interest rates high (higher for longer) was inevitable.
Given today’s regular FOMC meeting and Chairman Powell’s subsequent press conference, the Federal Reserve appears very concerned regarding the current price situation in the United States. Chairman Powell eased market anxiety by saying, “The next step will not be an interest rate hike,” but hinted that the interest rate cut would be delayed, saying, “We will not We saw no progress (decline) in inflation in the first quarter. this year (January to March). In short, we are not planning to increase interest rates immediately, but it is not yet clear when interest rates will be lowered.
On that day, the Federal Reserve officially acknowledged for the first time this year that the current price situation in the United States was at a worrying level. The Federal Reserve added new language to its statement, saying: “There has been a lack of additional progress toward the Committee’s 2% inflation goal in recent months. » This speaks to the Federal Reserve’s serious monitoring of rising prices, with the US price index beating market expectations three consecutive times this year.
At today’s press conference, many questions were asked, such as: “Is there a chance that interest rates will drop even once this year?” However, Chairman Powell simply responded: “I will make my decision based on real-time price indicators.” ” Furthermore, he added, “the path to lower interest rates will only be open if one of the following occurs: a weak labor market (increasing unemployment rate) or a drop in the inflation rate similar to that of last year. »
Wall Street predicted that following the FOMC meeting ended today, the Federal Reserve would be able to cut interest rates around September or December of this year, at best. Expectations of an interest rate cut in June have completely disappeared and the expectation is that there will be one or two cuts at most. Bank of America (BoA) said: “We maintain our outlook for rate cuts in December due to persistent inflation. »
As the Federal Reserve maintains its high interest rates, the Bank of Korea’s interest rate cut is expected to be further delayed. According to some observations, the freezing of interest rates is almost certain at the decision meeting on the direction of monetary policy which will be held on the 23rd of this month.
Due to the Federal Reserve freezing interest rates, the interest rate gap between Korea and the United States remained at 2 percentage points, the highest on record, for almost 10 months. The Bank of Korea is in a situation where it is difficult to lower interest rates before the United States due to high inflation and high exchange rates. In particular, the won-dollar exchange rate exceeded 1,400 won during trading on the 16th of last month for the first time in 17 months and recently moved in the high range of 1,300 won. If the high exchange rate persists, it will boost import prices and increase inflationary pressures. Last month, the consumer price inflation rate rose to 2.9%, falling to the 2% level for the first time in three months, but still at a high level.
At the same time, the Federal Reserve also announced its policy to slow down quantitative tightening, saying: “Starting in June, we will reduce the maximum monthly Treasury repayment amount by $60 billion (approximately 83 trillion KRW ) to $25 billion to slow the rate at which our securities holdings decline. This involves absorbing less liquidity to preserve market supply and aims to reduce confusion in the government bond market that occurs when the high interest rate situation persists for a long period.
New York = Correspondent Kim Hyun-soo [email protected]
Journalist Shin A-hyung [email protected]
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