The announcement arrives at a crucial time for the US economy
The Federal Reserve has kept its key interest rate unchanged following its latest meeting, the first time in 15 months it has decided not to raise rates.
The central bank announced this afternoon that it was holding rates steady after 10 consecutive hikes, a move that most analysts see as a “skip” rather than a pause as it assesses whether another increase might be needed in July.
Policymakers including the Fed’s chair, Jerome Powell, had strongly suggested rates would remain untouched in June as it judges whether several factors – including banks tightening their lending criteria after recent financial system turmoil – are weighing down on the economy.
Today’s decision keeps the Fed’s trendsetting interest rate in a target range between 5% and 5.25%. The central bank has bumped that rate by five percentage points since March 2022 in a bid to curb rampant inflation, which continued to tick steadily downwards in May.
The consumer price index (CPI) reached its lowest 12-month figure since March 2021 last month, according to new Bureau of Labor Statistics figures, hitting 4% – a sizeable drop from April’s reading of 4.9% in a development that likely gave the Fed a green light to keep rates where they are.
Despite today’s news, there’s little expectation that rates will remain unchanged for the remainder of the year. Markets still anticipate at least one further increase in 2023, likely as soon as the Fed’s next meeting – scheduled for July 25-26.
Important economic indicators to be released between now and then include June inflation figures, labor market statistics and new projections for GDP growth.
