Federal Reserve holds a stable interest rate on Wednesday and gives a little insight when further reduction in loan costs can occur in the economy where inflation remains above the target, growth continues, and low unemployment rates.
Emerged from their first policy meeting during the second term of office of President Donald Trump in the White House, Chairman of Fed Jerome Powell said the US central bank official “waited to see what policies were imposed” before assessing their effects on inflation, work and overall economic activities, and them not in a hurry to adjust further rates.
Trump returned to power last week with a promise of import tariffs, eradication of immigration, tax cuts and more loose regulations. He also said he would demand a lower interest rate and expect Fed to listen to it. Powell, speaking at a press conference after the end of the policy meeting of the last two days of the Central Bank, refused to respond to the statement of the Republican President, and Trump himself had not commented on Fed’s decision to hold a stable tariff on Wednesday.
After Fed lowered interest rates three times at the end of last year, inflation mostly moved sideways in recent months, and the central bank dropped from the language of its latest policy statement which said that inflation “had made progress” towards the 2%inflation goal, only recorded that the price rate increases “still increases.”
The reading of the new main inflation is still around half a percentage or more point above the Fed target.
Fed officials said they mostly believe that progress in reducing inflation will be continued this year, but now has delayed the tariff when they are waiting for data to confirm it.
“Economic activities continue to develop at a strong speed. The unemployment rate has been stable at a low level in recent months, and the condition of the labor market remains solid, “said the Federal Open Market Committee of the Bank’s central bank in its latest policy statement.
“In considering the level and time of additional adjustments to the target range for the level of federal funds, the committee will carefully assess the incoming data, developing views, and risk balance,” he said.
Powell said in his press conference that “we do not need to rush to adjust our policy attitudes” and monetary policy “positioned well” for the challenges faced. He noted that there was a risk to cut a level that was too aggressive, “We know that reducing policy restraints is too fast or too much that can hamper the progress of inflation.”
Round decisions to maintain the interest rate overnight in the range of 4.25% -4.50% at this time, coupled with new statements, placing Fed in a holding pattern when officials are waiting for further inflation and work data and clarity about the impact of Trump’s policy.
Futures short -term interest rates show that investors expect the central bank to hold interest rates again until June. US shares were closed on that day but from their lowest position, while the results of the US bonds change slightly. The dollar is slightly stronger towards a basket of currency.
‘Light Hawkish’
Fed’s decision to maintain a stable policy level is widely anticipated after three successive interest rates in 2024 which reduces the level of benchmark with full percentage points.
There is a debate in the central bank about how much interest rates further may need to go down, with policy makers anticipating maybe two quarter -quarter points cutting this year.
“The Fed seems to think that the economy is trapped by low unemployment and inflation improvement,” said Brian Jacobsen, head of economist at Annex Wealth Management. “The statement can be read with a little hawkish, showing that a little jolt on the tariff can expel the economy from this balance.”
Lindsay Rosner, Head of multi-sector fixed income in Goldman Sachs Asset Management, said, “While we continue to think the Fed Cycle Cycle has not carried out its path, FOMC wants to see further progress in inflation data to provide the next tariff, highlighted by the fact that they Deleting references about inflation makes progress. “
Fed officials said they wanted to see whether inflation continued to fall to Fed’s target in the coming months before relieving monetary policy again, while also revealing uncertainty about the effects of Trump’s plans for price pressure, labor markets and economic growth.
The Trump government has moved to deport some disagreement immigrants and freeze federal expenses, and can expand its reach to include immediately after this weekend new import tariffs on main trading partners such as Mexico and Canada.
Source: Reuters (Reporting by Howard Schneider; Additional Reporting by Michael S. Derby and Ann Saphir; Writing by Howard Schneider and Burns; Editing by Andrea Ricci and Paul Simao)
