Updated 20.28 | Published 20.01
As expected, the US central bank, the Federal Reserve (Fed), leaves the key interest rate unchanged – and opens up for a faster rate of interest rate cuts.
“Inflation has eased over the past year, but remains elevated,” the Fed said in a statement, according to the AP.
The Fed expects at least three interest rate cuts of 0.25 percentage points each in 2024. This is fewer than the four to five cuts that market analysts had expected, but more aggressive compared to the central bank’s previous signals.
A new wording in the statement can be interpreted as the Fed is done with interest rate increases as a tool to tackle inflation. The central bank writes that several factors will be taken into account before “some additional” increases can become relevant.
The bank’s 19-strong executive board was unanimous in the interest rate decision, which means that the policy rate remains in the range of 5.25–5.50 percent.
The announcement means that the Fed is keeping the interest rate unchanged for the third meeting in a row since it started raising it in March 2022. The last time the central bank raised the interest rate was in July, then by 0.25 percentage points. The 5.25-5.50 range is also the highest level in 22 years.
The goal is to reduce inflation in the US to 2 percent. Today, it stands at 3.1 percent.
Stock traders on Wall Street in New York welcomed the Fed’s decision with glee. The broad S&P 500 index, the Dow Jones industrial index and the technology-heavy Nasdaq composite index clearly rose after the announcement.