Fed keeps interest rate unchanged

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Following the two-day Federal Open Market Committee (FOMC) meeting, the Fed announced that the decision to keep the interest rate unchanged was unanimous.

The statement said that recent indicators point to economic activity expanding at a “solid” pace.

Employment gains have slowed since the beginning of last year but remain strong, the statement said, adding that the unemployment rate remains low and inflation remains high despite falling.

In the statement, it was noted that the FOMC aims for maximum employment and 2 percent inflation in the long run, emphasizing that the Committee believes that the risks to achieving these goals have settled into a better balance.

Stating that the economic outlook is “uncertain” and that the FOMC continues to be extremely cautious against inflation risks, the statement said, “In order to support these goals, it was decided to keep the federal funds rate at 5.25-5.50 percent.”

“The Committee does not anticipate that it will be appropriate to lower the policy rate until it has more confidence that inflation is moving sustainably towards 2 percent,” the statement said, adding that any adjustment to the policy rate would take into account incoming data, the evolving outlook and the balance of risks.

The statement noted that the Bank will continue to reduce its holdings of Treasury bonds, corporate debt and mortgage-backed securities as previously planned, and reiterated a strong commitment to reducing inflation to the 2 percent target.

No change in interest rates in 4 consecutive meetings

The Fed, which started raising interest rates by completing its asset purchase operation in 2022 in the face of high inflation in the US, has made a total of 11 rate hikes since March 2022 and raised the interest rate by a total of 525 basis points.

With these increases, the bank’s policy rate had risen to 5.25-5.50 percent, the highest level since 2001.

With its latest decision, the Fed left its policy rate unchanged at the current range for the fourth consecutive meeting. The bank last raised the policy rate by 25 basis points in July 2023.

Inflation in the US was recorded as 3.4 percent on an annual basis in December last year, after seeing the highest level since 1981 with 9 percent on an annual basis in June 2022.


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