The US Federal Reserve (Fed) opted this Wednesday to maintain interest rates at the current range of 5.25% and 5.5% and, as expected, said it would wait for new macroeconomic data before deciding. eventual increases before the end of the year.
The US Federal Reserve is keeping interest rates unchanged at their current range of 5.25% and 5.5%. Although the forecasts of the members of the Fed place interest rates at a higher figure, it does not necessarily mean that the increase will occur.
He wants to wait for new price data before deciding on any increases before the end of the year.
Its objective is to place inflation at 2%. At the moment, inflation has fallen from the interannual maximum of 9.1% in June 2022 to 3.7%. The next meeting will be at the end of October.
“We will continue to make our decisions based on the totality of incoming information and its implications for the outlook for economic activity and inflation. (…) Restoring price stability is essential to lay the foundation for achieving maximum employment and prices stable in the long term,” Powell stressed.
FOMC members estimate that inflation will close the year at 3.3%, one tenth higher than forecast in June, while in 2024 it will fall to 2.5%. Their calculations also raised the country’s gross growth to 2.1%, compared to the 1% anticipated three months ago.
Powell justified his caution in the impact of his decisions: “We understand that our actions affect communities, families and businesses throughout the country. Everything we do is in service of our public mission. We will do everything we can to achieve the objectives of maximum employment and price stability,” he said.
The president of the Fed trusted that the reduction in inflation will be achieved without causing a recession.
“I have always maintained that a soft landing is possible, that there really is a path to that soft landing. It is also feasible that such a path could be narrowed or widened. Ultimately, apparently, this determination could be influenced by factors outside our control. control,” he stressed.
That opinion is not isolated. Gina Bolvin, president of the consulting firm Bolvin Wealth Management Group, stressed this Monday that she is “far away” from the recession anticipated by many and “closer” to that soft landing.
However, for the president and CEO of Ally Invest Securities, Frank Lietke, “a resilient economy and high consumer spending over the coming months” would lead the Fed to raise rates again for next year.
Unemployment is another key data that is considered in these decisions. The latest data reflect that job creation in recent months has slowed down and that only 187,000 were created in August, below the average of 271,000 for the last twelve months.