For the third time in a row
The US Federal Reserve is shying away from cutting interest rates
December 13, 2023, 8:00 p.m
Despite easing inflationary pressure, the US Federal Reserve decides against lowering the key interest rate. The key monetary policy rate therefore remains unchanged at its highest level in more than 20 years.
The US Federal Reserve kept the key interest rate constant at the last meeting of the current year. The monetary authorities led by Fed Chairman Jerome Powell decided to leave the key monetary policy rate in the range of 5.25 to 5.50 percent. Commercial banks can borrow central bank money at this rate. The decision was expected. It is the highest value in more than two decades. The financial markets had expected another break.
After some aggressive interest rate hikes, the monetary authorities are now keeping their feet still for the third meeting in a row. In their interest rate outlook for 2024, they also signal that the key monetary policy rate is likely to fall over the next year – by 0.75 percentage points.
None of the monetary authorities see interest rates at the end of next year being higher than they are now. “I expect a first interest rate cut from summer of next year,” KfW chief economist Fritzi Köhler-Geib predicted before the meeting.
Inflation pressure has recently continued to subside: the inflation rate fell slightly to 3.1 percent in November, after 3.2 percent in October. This means that the central bank’s target inflation mark of 2 percent is gradually coming into view, which is seen as ideal for the economy. The economy has proven to be robust despite the tight monetary policy. It grew by an annualized 5.2 percent in the third quarter. The central bank wants to combat inflation with the tight monetary policy line without strangling the economy.