Federal Reserve Keeps Interest Rates Steady at 5.25%–5.50%
The Federal Reserve has decided to keep its key interest rate unchanged once again. The much awaited data now reveals that the FED is taking a cautious approach to monetary policy despite recent signs of cooling inflation.
Key points:
- The Federal Reserve kept its key interest rate steady.
- The central bank revised its rate cut forecast, projecting only one quarter-point reduction by year-end, down from three cuts predicted in March.
- The Fed acknowledged modest progress in its battle against inflation but reiterated its commitment to the 2% inflation target.
- The inflation report released earlier on Wednesday showed a cooler-than-expected reading.
- Fed officials estimate their preferred inflation gauge, the PCE index, will fall to 2.6% by December.
The Fed’s decision to hold rates steady comes after the inflation report, which revealed a drop to 3.3%. The data shows that the annual core inflation rate dropped to 3.4% from 3.6% the previous month.
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Federal Reserve cites modest progress in battling inflation
In its statement, the Federal Reserve acknowledged the resumption of at least some gains in its battle to tame inflation. The Fed noted that “in recent months, there has been modest further progress toward the (Fed’s) 2 percent inflation objective.”
The central bank’s updated projections now estimate they will lower the federal funds rate by a quarter of a percentage point to a range of 5% to 5.25% by the end of the year.
Fed officials also revised their estimates for their preferred inflation measure. They now expect annual PCE inflation to fall from 2.7% to 2.6% by December. This projection is slightly above the 2.4% predicted in March.
