Categories: World

The Federal Reserve is on pause and will not raise interest rates in the US.

The Federal Reserve (Fed) decided to take a break this Wednesday and interest rates will not rise this monthalthough he did not rule out continuing to set them up in the future if necessary.

The rates thus remain in the range between 5% and 5.25%, the highest level since mid-2007, after a series of 10 consecutive increases implemented to reduce inflation.

“Keeping the target range stable at this meeting enables the Board (Federal Open Market) assess additional information and its implications for monetary policy,” the Fed said in a statement warning that despite the pause, it was prepared for additional hikes “if risks emerge” preventing inflation from falling to the 2% target.

In order to determine the degree of further tightening of the policy which suitable for achieving that goalThe committee will consider the cumulative tightening of monetary policy, how monetary policy will affect economic activity and inflation, and economic and financial factors.

The chairman of the Fed, Jerome Powell, admitted on the same Wednesday that the agency could consider further increases in interest rates this year, so the announced pause could only be temporary.

“Looking ahead, almost all participants in Board think it likely that some additional rate hikes will be needed this year to bring inflation closer to the agency’s 2% target, he told a news conference.

“At this meeting, considering how far and how fast we have moved, we think it is prudent to keep the target range stable so that the committee can assess the additional information and its implications for monetary policy,” Powell added.

In his speech to the media, Powell insisted on justifying this pause, and after pointing out that the “velocity” at which rates were raised to decrease inflation last year it was “very important”, now the “fate” of 2% is “closer” and therefore it is “reasonable, common sense, to go a little slower”.

On the same day, the Fed upgraded its economic projections for the country this year, and members of its Federal Open Market Committee, which decides monetary policy, are now counting on gross domestic product growth of 1%, six-tenths. above the March forecast.

However, they reduced the forecast for 2024 by one tenth, year in which he now calculates that the economy will progress by 1.1% compared to the 1.2% he previously estimated. For 2025, he predicts a growth of 1.8%, one tenth more than the previous forecast.

The economic forecasts released by the Fed are an average of committee members’ estimates. The same applies to calculations on unemployment or inflation.

The American central bank thus believes that inflation will continue to slow down to 3.2% this year, or 2.5% in 2024, but does not expect that the desired goal will be reached in 2025 either, the year in which it is calculated that inflation to be set at 2.1 percent.

As for unemployment, the Fed now estimates a smaller increase in the number of unemployed

Source: Panama America

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