The Federal Reserve has confirmed it will continue to hold interest rates at a 23-year high, despite previously indicating it expected to cut rates three times this year.
During the first two-day meeting of 2024, policymakers at the central bank decided to maintain the benchmark interest rate between 5.25% and 5.5%, which has been in place since July.
The committee has kept rates constant because it is seeking to simultaneously achieve 2% inflation over the long run and maximum employment, while the economic outlook is particularly uncertain. The annualized inflation figure for December was 3.4%, according to the US Bureau of Labor Statistics.
Therefore, the Fed does not expect it will be appropriate to reduce the target range until it has gained greater confidence that inflation is moving sustainably towards its 2% objective.
Even though rates have not been changed, the committee said that the risks to achieving its employment and inflation goals are “moving into a better balance”.
Fed chairman Jerome Powell also said interest rates are unlikely to go any higher and “almost every” policymaker believes it will be appropriate to reduce rates later this year.
For consumers, this means relief from high borrowing costs, particularly for mortgages, credit cards and auto loans, can be expected soon.
According to the Fed, officials are beginning to contemplate the first rate cut since 2020 because indicators have recently suggested economic activity has been expanding at a solid pace.
The unemployment rate has also remained low, inflation has eased and job gains remain strong, despite moderating since early last year.
The central bank is scheduled to hold its next rate-setting meeting in March.
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