Record levels remain for the time being
US Federal Reserve does not touch interest rates
March 20, 2024, 7:02 p.m
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In eleven steps, the US Federal Reserve is raising interest rates to record highs in the fight against high inflation. However, the central bankers do not believe the time has yet come to reverse course. However, they continue to hold out the prospect of three interest rate cuts this year.
The US Federal Reserve continues to keep the key interest rate at a high level. It decides to leave the key monetary policy rate unchanged in the range of 5.25 to 5.50 percent. The Fed pushed it up with a total of eleven interest rate hikes and has kept it constant since September. The current decision was unanimous.
In their updated outlook, the council members also signal that it is likely to fall this year – by 0.75 percentage points. This corresponds to three interest rate steps downwards. They therefore maintained their outlook from December. But at least nine of the 19 management members only expect two interest rate hikes or less.
Inflation in the USA has recently been on the rise again and is clouding the prospects of a rapid interest rate turnaround by the Federal Reserve. Consumer prices rose by 3.2 percent in February compared to the same month last year, after an inflation rate of 3.1 percent in January. The central bank is aiming for an inflation mark of two percent.
“The basic prerequisite for an interest rate cut is that the Fed is convinced of a sustained decline in the inflation rate towards the two percent target. In February, inflation moved virtually sideways again,” said KfW chief economist Fritzi Köhler-Geib. The coming data should therefore increase confidence that price increases are really under control before the Fed can turn around interest rates.