Central Bank Keeps Interest Rates Unchanged, No Immediate Plans for Reduction

It was not surprising that the Federal Reserve kept the federal interest rates at 5.25-5.50 percent for months, at its highest levels in 22 years.

The decision from the Federal Market Committee, while the markets were waiting for a stance from Jerome Powell, the Federal Reserve Chairman, after a two-day closed-door meeting about the timeline for starting the path of interest rate reductions and thus reducing the cost of borrowing.

Paul said in his press conference, “Inflation is still high, and the path to reduction is difficult,” adding, “We will bring inflation back to our target of two percent.”

The Federal Reserve Board sent a lukewarm signal that it has finished raising interest rates after its meeting on Wednesday, but made it clear that it is not prepared to start cutting interest rates.

In a significant change of direction, the Federal Market Committee removed the phrase that indicated a desire to continue raising interest rates until inflation is controlled.

However, the statement also mentioned that there are no plans yet to lower interest rates as inflation continues to be above the central bank’s target. It clarified that “economic prospects remain uncertain and we will remain vigilant to the risks of inflation”.

The statement added, “The committee does not expect it to be appropriate to lower the target range until it gains greater confidence that inflation is moving sustainably towards two percent.”

While the statement briefly outlines the factors that policymakers will consider when evaluating the policy, it does not explicitly rule out further increases. One notable change was the exclusion of the delayed effects of monetary policy from consideration. Officials largely believe that it takes between 12 and 18 months for amendments to come into effect.

The statement stated: “When considering any changes to the targeted range for the federal funds rate, the committee will carefully evaluate the incoming data, evolving expectations, and the balance of risks.”

This language has replaced a range of factors, including “the cumulative tightening of monetary policy, the delayed impact of monetary policy on economic activity and inflation, and economic and financial developments.”

These changes were part of the comprehensive reform that the Federal Reserve Bank sought to implement in order to chart a path forward amidst declining inflation data, while economic growth remained resilient.

The statement indicated that the economic growth was “strong”, highlighting the progress made regarding inflation.

After the announcement of the Federal Reserve, American stock indices further deepened their declines.