The US Federal Reserve (Fed) has left its main interest rate unchanged at a high level for the fourth time in a row. It remains within the range of 5.25 to 5.5 percent, as the Council of Central Banks announced in Washington on Wednesday. Commercial banks can borrow central bank money at this rate. The decision was expected. It is the highest value in more than twenty years. The Fed made it clear that it was not yet ready to cut rates.
People must first gain more confidence that inflation will move sustainably towards two percent, according to the US Federal Reserve statement.
Rapid inflation
Since March 2022, the Fed has raised its key interest rate at a record pace by more than five percentage points in the fight against inflation, but recently stopped adjusting the interest rate screw. The rapid inflation was partly caused by the increase in energy prices after the Russian attack on Ukraine.
Given declining inflation, it is expected that US policy rates may soon fall again. In December the annual interest rate was 3.4 percent. The US Federal Reserve aims for price stability of two percent in the medium term. Keeping inflation under control is the classic task of central banks.
Fight against high consumer prices
Central banks are adjusting interest rates in the fight against high consumer prices. When interest rates rise, individuals and companies have to spend more on loans – or borrow less money. Growth slows, companies cannot pass on higher prices indefinitely – and ideally inflation falls. At the same time, however, there is a risk of a recession. Finding the right balance is the big challenge for central bankers.
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.
