The Fed Holds Interest Rate Again. The United States Central Bank or Federal Reserve (The Fed) maintained its benchmark interest rate at the Federal Open Market Committee (FOMC) meeting which ended on Wednesday (21/3/2024) local time. The Fed decided to maintain the target range for its benchmark federal funds rate (FFR) at 5.25% – 5.5%. Nevertheless, policymakers indicated cutting interest rates by the end of 2024.
The Chair of the Fed, Jerome Powell, said that one of the considerations for holding interest rates was because the Fed considered it inappropriate to reduce the FFR benchmark interest rate until there was greater confidence that inflation was moving closer to the 2 percent target.
Powell also emphasized that the Fed is ready to adjust its monetary policy stance if risks arise that could hamper the achievement of targets by considering various information, including labor market conditions, inflation pressures and inflation expectations, as well as financial and international developments.
The Fed’s new policy describes inflation as still potentially “rising” and updated quarterly economic projections show the personal consumption expenditures price index excluding food and energy increasing by 2.6% by the end of the year, compared with 2.4% in the projection issued in December.
The Fed Holds Interest Rate Again, However, 10 out of 19 Fed officials still see the potential for a reduction in the FFR benchmark interest rate at the end of this year.
The Fed began an aggressive monetary policy tightening cycle two years ago in response to surging inflation that would eventually reach a 40-year peak, but has kept its policy interest rate at a range of 5.25% – 5.50% since last July.
The Fed’s decision this time is in line with economists’ projections. Chief US economist at Santander US Capital Markets LLC. Stephen Stanley previously predicted that the Fed would almost certainly maintain the FFR interest rate at the FOMC this time.
The FOMC is expected to almost certainly maintain its policy on the Fed’s interest rates, which states that interest rates will not be lowered until the committee has greater confidence that inflation is moving closer to its 2% target.
