2023-06-14 19:08:38
The US Federal Reserve (Fed) is taking a standstill in raising interest rates in the fight once morest inflation. The US central bank umbrella had previously raised interest rates ten times in a row. There may be a further interest rate hike in July.
The Fed’s decision to pause is not unexpected. A large majority of economists had already expected the Fed to leave interest rates unchanged. In the previous decision in May, the interest rate in the United States was raised by a quarter of a percentage point to a range of 5.00 to 5.25 percent. That is the highest level in sixteen years.
Fed Chairman Jerome Powell will comment on the interest rate decision at a later date.
By making borrowing more expensive, the Fed slows down demand in the economy, which should prevent prices from rising as fast. There is a risk that the economy might end up in recession due to declining demand. The Fed began raising interest rates in March last year.
Powell pointed out during a speech in May that strong central bank intervention is less necessary. This is because the US financial sector is already experiencing so-called monetary tightening as a result of the recent turmoil in the banking sector. As a result, banks have already become more cautious in granting new loans, so that borrowing costs do not have to be increased as much to curb demand.
Inflation in the US cooled somewhat
On Tuesday it was announced that inflation in the US economy (the largest in the world) had cooled to 4 percent in May. Core inflation, which excludes strongly fluctuating energy and food prices, remains stubbornly high at 5.3 percent.
The decision to leave interest rates unchanged was taken unanimously by policymakers, according to a statement from the Fed. The Fed also states that the banking sector is healthy and recent job growth has been robust. Inflation will remain at an elevated level, according to the Fed. The central bank now wants to take a moment to review all the information to determine its impact on policy.
The Fed also released new forecasts, hinting at further rate hikes later this year. The central bank also raised its forecast for economic growth this year.
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