US Fed did not cut interest rates
The US central bank Federal Reserve once again did not cut interest rates and kept them in the range of 3.5%-3.75%. This is the third consecutive meeting when the rates have been kept stable. The Fed has adopted a cautious stance amid the rise in global energy prices and increasing tensions in West Asia. This last meeting chaired by Jerome Powell gave many important signals.
The US central bank Fed decided to keep interest rates stable in its meeting on 28-29 April. The market was already anticipating this decision, but many signals related to the meeting can decide the direction of monetary policy in the coming months. Let us tell you in detail about 5 big things related to the meeting.
1. Interest rates stable, but opposition increased
The Federal Open Market Committee (FOMC) decided to keep rates at 3.5%-3.75% by a vote of 8-4. The special thing was that four members opposed it, which is the biggest difference of opinion after 1992. It is clear from this that differences of opinion regarding policy are increasing even within the Fed. The Fed said in its statement that its goal is 2% inflation and maximum employment, but the current global situation is making this balance difficult.
2. Threat to inflation still persists
The Fed clearly indicated that inflation still remains a matter of concern. Rising global energy prices, particularly due to tensions in West Asia, could keep inflation higher. Jerome Powell said in the press conference that it is not yet clear what the impact will be on energy prices. He said that I will have to wait and see. Inflation in the US is already above the Fed’s 2% target, so new geopolitical circumstances are making it more complicated.
3. The condition of the economy is strong
According to the Fed, the American economy is still in a strong position. Economic activities are increasing at a steady pace and consumer spending is also sustained. Although the pace of employment growth has slowed down a bit, there has been no major change in the unemployment rate. Powell said that private domestic demand (PDFP) remains strong, which better reflects the real state of the economy.
4. The next step will depend on data
The Fed clarified that any future decision will depend entirely on the upcoming economic data. The FOMC said that it will keep an eye on the labor market, inflation pressures, inflation expectations and international events. If the situation worsens, the Fed may change its policy. That means, for now the wait and watch strategy will continue.
5. Powell’s last meeting, but role continues
This meeting was Jerome Powell’s last meeting as chairman. His tenure ends on May 15. US President Donald Trump has nominated Kevin Warsh as the next Fed chief. However, Powell indicated that he wants to remain on the Fed board as governor. He said that he will fulfill his responsibility till his stipulated tenure.
Also read- Differences in Fed meeting, interest rates did not change, such dissatisfaction visible after 34 years
