WASHINGTON — Federal Reserve officials maintained the reference interest rate at 5.25%-5.50% for the fifth consecutive time, according to a statement from the Central Bank or Fed at the end of its monthly meeting.
Maintaining high rates allows the members of the Monetary Policy Committee (FOMC), who met Tuesday and Wednesday, to “carefully evaluate the incoming data, the evolution of the outlook, and the balance of risks,” the organization said in a statement. release.
The members of the Committee indicated that they still hope to reduce their reference interest rate three times during 2024, despite the fact that inflation remains at a high level at the beginning of the year. However, they foresee further reductions in 2025 and raised their inflation forecasts.
In their new quarterly projections, Fed officials predicted that growth and high inflation will persist through this year and next. Therefore, they projected that interest rates would remain high for longer.
Consumers, for their part, still do not see the inflationary relief that the US Central Bank refers to.
June remains the tentative date
They now foresee three reductions in 2025, one less than in their December projections. They also forecast that “core” inflation, which excludes the volatile items of food and fuel, will remain at 2.6% at the end of 2024, compared to their previous expectation of 2.4%. In January, core inflation was 2.8%, according to another measure used by the Fed.
The forecasts taken together suggest that economic policymakers continue to foresee an unusual combination in the US economy: a beneficial labor market and a “healthy” economy, according to the Joe Biden administration.
Some economists argue that the Fed’s June meeting will be the most likely occasion to announce its first rate reduction, which would begin to reverse the 11 increases started two years ago.
The Fed’s increases have helped reduce inflation, from its peak of 9.1% in June 2022 to 3.4%. But with it, the cost of loans for businesses and households has increased.
In addition to this negative effect, we add that prices for almost all products remain sky-high, and people do not perceive the decrease in inflation that the White House is talking about.
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Source: With information from AFP and AP.
