Announcement arrives amid growing speculation on central bank's path forward
The Federal Reserve has decided to leave interest rates unchanged following its latest meeting, staying the course on its wait-and-see approach amid signs of a still-resilient US economy and persistent inflation.
The central bank announced on Wednesday that it would hold its funds rate in the range of 5.25% to 5.5% again, the sixth time in a row it has kept that trendsetting interest rate steady.
In its statement, the Fed noted that the economic outlook remained “uncertain” and highlighted a lack of progress towards its target inflation rate of 2%.
It also hinted at its readiness to begin hiking rates again if risks to its inflation goals emerge. “The Committee would be prepared to adjust the stance of monetary policy as appropriate if risks emerge that could impede the attainment of the Committee’s goals,” it said.
Key inflation measures have ticked upwards in recent weeks, helping lower speculation of a possible imminent rate cut by the Fed. At last reading, the so-called core consumer price index, which excludes food and energy costs, had increased by 0.4% month-over-month and 3.8% on a yearly basis.
Job growth in the US, meanwhile, exceeded expectations in March as the labor market posted a solid all-round performance in the first quarter, suggesting continuing robustness despite a 15-month campaign of rate hikes by the Fed which only ended in July of last year.
Those developments have seen markets dial down the likelihood of a Fed cut – with some analysts even suggesting that a further hike could be on the way before the end of the year if inflation starts to balloon again.
In early April, Federal Reserve Bank of Dallas president Lorie Logan warned it was premature to consider lowering interest rates and expressed her growing concern that progress on bringing down inflation could stall.
“I believe it’s much too soon to think about cutting interest rates,” Logan, whose views are closely followed by market watchers, said. “I will need to see more of the uncertainty resolved about which economic path we’re on.”
She added that Fed officials should be ready to “respond appropriately” if inflation starts to tick upwards again.
The Fed is next scheduled to meet on interest rates from June 11-12, with four further meetings set to take place before the end of the year.
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