On Wednesday, the Federal Reserve decided to keep the current interest rates, which currently stand at historically elevated levels, unchanged. This decision evidences the Fed's commitment to combat inflation and bring it down to its desired target of 2%. The central bank is retaining its basic interest rate within the 5.25%-5.5% range, expecting a further rate hike to 5.75% by year-end.
Most of the twelve members of the Federal Open Market Committee (FOMC) favor raising interest rates again this year. Meanwhile, seven representatives said that interest rates should be maintained at the current levels until the end of the year.
The latest forecasts indicate a projected decrease in rates of 0.5% for the upcoming year, down from their peak range of 5.5% to 5.75%. This suggests that interest rates will persist at relatively elevated levels for a more extended period than previously anticipated. In June, the Federal Reserve outlined plans to reduce rates by a whole percentage point by the year 2024.
Chair of the Federal Reserve of the United States Jerome Powell emphasized that the goal is to boost economic activity, and he is ready to justify more rate hikes if they are deemed necessary.
The Federal Reserve continues to closely monitor inflation, despite cutting its forecast. It now anticipates inflation to conclude the year at 3.7%, down from its previous estimate of 3.9%. Expectations suggest that inflation will go down to 2.6% in the following year.
The Federal Reserve additionally reported slower job growth and has forecasted that the unemployment rate would hit 3.8% this year, which is a decrease from the 4.1% that was originally projected for this year and will remain at that level through 2025.
We now expect economic growth of 2.1%, up from the previous estimate of 1%, and 1.5% in the next year, up from the previous estimate of 1.1%.
Federal Reserve officials maintain a cautious stance, carefully assessing the inflation risks and the potential consequences of overstimulating the economy. Powell emphasized the importance of restoring price stability in order to prevent prolonged economic instability and the need for recurrent rate increases in the future.Login in Personal Account