As expected, the US Federal Reserve has not changed its interest rates again. The Fed announced on Wednesday after its interest rate meeting in Washington that the main interest rate will remain within a range of 5.25 to 5.50 percent. After several aggressive interest rate hikes, the monetary authorities are holding their feet for the third time in a row. Bank economists expected this decision. The Fed has lowered its growth forecast for 2024.
The Fed had not changed its interest rates in September and November. The Fed last tightened its monetary policy by 0.25 percentage points in July to combat inflation. In March 2022, the policy interest rate was still in a range of 0.0 to 0.25 percent.
Interest level: This is expected to decrease in 2024
At the same time, the monetary authorities indicate in their 2024 interest rate outlook that the key monetary policy rate is likely to decline in the coming year – by 0.75 percentage points. None of the monetary authorities expect interest rates to be higher at the end of next year than they are today.
For the coming year, the Fed expects economic growth to be slightly lower than expected three months ago. The gross domestic product (GDP) of the world’s largest economy is expected to grow by 1.4 percent, as the Fed announced in Washington on Wednesday. That would be 0.1 percentage point less than predicted in September. For this year, the Fed predicts growth of 2.6 percent (2.1 September).
Inflation is expected to reach 2.4% in 2024
The central bank also assumes lower inflation rates. Inflation is expected to average 2.4 percent in 2024, down 0.1 percentage point from the previous forecast in September, central bank data showed on Wednesday. The Fed expects inflation of 2.8 percent this year.
Core inflation, i.e. without taking food and energy prices into account, is expected to be 2.4 percent next year (September: 2.6 percent). The Fed is committed to the goals of price stability and full employment and targets inflation of 2 percent.
“This is anything but surprising”
Experts had expected the Fed’s decision. “The Fed is essentially abandoning the prospect of further rate hikes. “This is anything but surprising if you take the totality of public statements in recent weeks as a benchmark,” Elmar Völker of LBBW Research told Reuters in an initial response. A first interest rate cut is expected in mid-2024, Völker said. Friedrich Heinemann of ZEW also made similar comments. Wage increases and core inflation remain at four percent. “The risk that inflation expectations will become more deeply anchored has therefore not yet disappeared. Anyone expecting rate cuts at the end of the first quarter is probably wrong,” Heinemann said.
Source: Krone
I’m Ben Stock, a journalist and author at Today Times Live. I specialize in economic news and have been working in the news industry for over five years. My experience spans from local journalism to international business reporting. In my career I’ve had the opportunity to interview some of the world’s leading economists and financial experts, giving me an insight into global trends that is unique among journalists.
