US Fed still worried about inflation, no cut in policy interest rates for the seventh time in a row
US Fed: Consumer price inflation in the US continued to decline, although it still remains above 2 percent and is a cause of concern for the central bank. In the last 12 months till May, inflation has increased by 3.3 percent on an annual basis. In view of this, the Fed has decided not to cut interest rates for the seventh time in a row.
The US Federal Reserve Bank (Federal Reserve Bank) voted in favor of keeping the key policy rate unchanged at 5.25-5.50 percent in its latest monetary policy meeting. During the COVID-19 pandemic, interest rates were close to zero.
Raising interest rates is a monetary policy tool that generally helps suppress demand in the economy, helping to reduce inflation rates. The Fed said, 'We are maintaining a restrictive stance on monetary policy to keep demand in line with supply and reduce inflationary pressure. US Federal Reserve Chairman Jerome Powell said, "I will have more to say on monetary policy after a brief review of economic developments."
Consumer price inflation in the US continued to decline, although it still remains above 2 percent and is a cause of concern for its central bank. In the past 12 months through May, inflation rose 3.3 percent on an annual basis. "In recent months, there has been modest progress toward the committee's 2 percent inflation target," the US Federal Reserve said in its monetary policy statement this week.
The central bank wants to achieve maximum employment and inflation at a rate of 2 percent in the long run. Powell said inflation data so far this year has not given him much confidence. "The Committee believes that the risks to achieving its employment and inflation goals have moved toward a better balance over the past year. The economic outlook remains uncertain, and the Committee remains highly attentive to inflation risks. Regarding consideration of any rate adjustments, Pawley said the Fed will carefully assess incoming data, the evolving outlook, and the balance of risks. "The Committee does not expect it to be appropriate to lower interest rates until it is confident that inflation is moving steadily toward 2 percent," the Fed report said.
Officials at the US Federal Reserve now expect only one rate drop this year, followed by four next year. Meanwhile, US inflation decreased to 3.3% in May, increasing hopes for an early rate cut. Following the rate decision and inflation data, the S&P 500 hit new highs, gaining over 5,400 points. Analysts predict stocks to continue to rise regardless of policy actions. The US Fed also reaffirmed its economic estimates. Monetary policymakers typically expect GDP growth to drop from last year's pace.
