US: Fed keeps interest rates steady for first time in months
The US Federal Reserve on Wednesday voted to stop its recent string of interest rate hikes, but warned that inflation remained “elevated” and hinted that rates could rise again this year.
“This allows the economy a little more time to adapt as we make our decisions going forward,” Fed Chair Jerome Powell said at a press conference following the announcement.
The Fed’s benchmark interest rates will therefore remain between 5.0% and 5.25%, after 10 consecutive increases, in an attempt to control inflation accelerated by the Russian invasion of Ukraine.
While the benchmark rates, which the Fed charges commercial lenders for borrowing funds, are different and generally lower than those paid by ordinary consumers on loans or mortgages, they also tend to impact these rates.
‘Some additional rate hikes would be appropriate,’ says Powell
The Fed had already made clear in its latest rate announcement that this course of action was likely in June.
European markets were therefore buoyant on Wednesday, with Germany’s DAX hitting a new high at one point in trading.
In the US, where the bell did not ring to stop trading when the Fed acted, markets briefly fell in response to the Fed’s warning that further rate hikes were possible in 2023, something Powell also later said.
“Looking ahead, nearly all committee members see it as likely that some additional rate hikes will be appropriate this year to bring inflation down to 2% over time,” Powell said.
Officials now expect the federal funds rate to hit 5.6% this year, implying two more 0.25% hikes in 2023, up from the 5.1% estimate in the last set of forecasts released in March.
The Fed also released an updated economic forecast on Wednesday, raising its 2023 GDP growth projections for the US to 1% from 0.4% in March.
Source: DW
Lori Barajas is an accomplished journalist, known for her insightful and thought-provoking writing on economy. She currently works as a writer at 247 news reel. With a passion for understanding the economy, Lori’s writing delves deep into the financial issues that matter most, providing readers with a unique perspective on current events.