2023-06-14 20:00:00
However, economic growth is likely to be higher than assumed three months ago.
The gross domestic product (GDP) of the world’s largest economy is therefore expected to grow by one percent, as the Fed announced in Washington on Wednesday. That would be 0.6 percentage points more than forecast in March. For the coming year, the Fed predicts growth of 1.1 percent.
Inflation, meanwhile, is expected to average 3.2 percent in 2023, down 0.1 percentage point from the previous forecast in March, central bank data showed on Wednesday.
However, core inflation, i.e. excluding food and energy prices, is expected to be slightly higher this year at 3.9 percent (March forecast: 3.6 percent). The Fed is committed to the goals of price stability and full employment, and is aiming for an inflation rate of 2 percent.
The Fed kept its feet still for the first time today following ten increases in interest rates. According to corresponding signals from the management of the central bank, this was expected on the financial markets.
US Federal Reserve Chairman Jerome Powell confirmed that there is a strong bias in the Fed for further rate hikes. Almost all members of the FOMC monetary policy committee currently believe that there will be additional rate hikes, Powell told the press following the rate meeting.
However, Powell also emphasized that the Fed does not commit itself and only makes its concrete decisions at the respective interest rate meeting. No decisions for the future were made at the current meeting – not even for the upcoming meeting in July.
In March 2022, the key interest rate was still just above the zero line. Since then, the Fed has been fighting high inflation with sharp interest rate hikes. Inflation has also fallen in recent months, but underlying core inflation has only slowed.
At the same time, however, the currency watchdogs around Fed boss Powell signaled that the interest rate peak may not yet have been reached: At the end of the year, they are aiming for an average interest rate level of 5.6 percent – in March they had targeted 5.1 percent. This would mean that the central bank might take another two steps up this year, each by a quarter of a percentage point. The Fed now wants to use the lull to look at more data before deciding on further tightening. All eyes are now on the next meeting in July.
Fed Director Philip Jefferson recently stressed that if the central bank were pausing on the interest rate path, this should not be interpreted as a signal that the summit has already been reached. The Fed might therefore continue the aggressive tightening course it started in March 2022, despite the inflation rate recently falling to 4.0 percent. The monetary watchdogs are aiming for an inflation rate of 2.0 percent and are far from having reached their goal.
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