Fed declines to cut rates as inflation, consumer confidence improve

The US Federal Reserve (Fed) kept interest rates on hold on Wednesday after its first monetary policy meeting of the year.

After months of strong economic data and slowing inflation, the Federal Open Market Committee (FOMC) left its benchmark interest rate unchanged at 5.25% to 5.5%.

The decision was widely expected, but Fed watchers will tune in to Powell’s press conference at 2:30 p.m. ET to see how the central bank moves in the coming months. are doing.

Federal Reserve officials have indicated that a rate cut will occur in 2024 as long as inflation continues to decline. According to the latest Consumer Price Index (CPI), the inflation rate was 3.4% in December, significantly down from the peak of 9% in June 2022.

Despite widespread predictions of a recession a year ago, GDP growth and the job market remain strong, but this month’s series of high-profile layoffs are more than expected by the Fed. “Soft Landing” could be a major blow.

Private companies in the United States added 107,000 new jobs in January, far less than the 150,000 expected by economists polled by the Wall Street Journal, according to a new report from ADP. ing. The Department of Labor will release January employment statistics on Friday.

But consumers are also more optimistic about the state of the U.S. economy than they have been in the past two years, according to a survey released this week by consulting and polling firm Gallup and business research nonprofit Conference Board.

This could be good news for President Biden, who is trying to sell his economic base to voters as his re-election campaign heats up. Although the Fed’s decisions about when and how to cut rates are completely independent of politics, the timing nevertheless exposed Mr. Powell and the central bank to partisan pressure.

Sen. Elizabeth Warren (D-Mass.), Sen. John Hickenlooper (D-Colo.), Sen. Jacky Rosen (D-Nev.), and Sen. Sheldon Whitehouse (D-Nev.) spoke with Powell on Sunday. In a letter to him, he asked the Fed to lower interest rates. They argue that these rates are “exacerbating this country’s persistent housing access and affordability crisis.”

“As the Fed considers its next actions in the new year, it will consider the impact of its rate decisions on the housing market and reverse onerous rate hikes that have put affordable housing out of reach for too many. We urge you to do so,” the senators wrote.