Key set unchanged
The US Federal Reserve takes a pause on interest rates
06/14/2023, 8:02 p.m
After the rate of inflation in the USA recently fell again, the monetary watchdogs are suspending their interest rate hikes, at least temporarily. You want to monitor the situation first. However, they also make it clear that they believe that the interest rate peak has not yet been reached.
After ten rate hikes in a row, the US Federal Reserve is taking a break. The Federal Reserve is leaving the key monetary policy rate in the range of 5.0 to 5.25 percent. “Holding the interest rate spread constant at this meeting allows the committee to assess additional information and its implications for monetary policy,” said the Fed’s monetary policy FOMC. According to corresponding signals from the management of the central bank, this was expected on the financial markets. At the same time, the central bank updated its inflation and growth expectations for this year.
However, the currency watchdogs around Fed boss Jerome Powell also signaled that the interest rate peak is unlikely to be reached yet: At the end of the year they are targeting an average interest rate level of 5.6 percent – in March they had targeted 5.1 percent. This would mean that the central bank could take another two steps up this year, each by a quarter of a percentage point. 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 could therefore continue the aggressive tightening course it started in March 2022, despite the inflation rate recently falling to 4.0 percent.
The Fed is now anticipating a slightly lower inflation rate this year than assumed just three months ago. Inflation is expected to average 3.2 percent in 2023, down 0.1 percentage point from the previous forecast in March, central bank data showed.
The central bank also adjusted its growth expectations: the Fed is now predicting slightly higher economic growth for this year than assumed three months ago. The gross domestic product (GDP) of the world’s largest economy will grow by one percent in 2023. That would be 0.6 percentage points more than forecast in March.
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 two percent.