Policymakers have raised interest rates sharply over the past year in hopes of quelling inflation and cooling the economy.
of federal reserve On Wednesday, the governor kept interest rates unchanged for the fourth time in a row, leaving the door open for a rate cut later this year if inflation continues to subside.
The widely anticipated decision left interest rates unchanged at 5.25% to 5.5%, the highest level in 22 years.
Policymakers also made significant changes to their statements after the meeting, softening some of the hawkish language. Officials removed language suggesting further interest rate hikes might be warranted and replaced it with more neutral language about the direction of monetary policy in the coming months.
The policy-setting Federal Open Market Committee acknowledged that “risks to employment and achieving inflation goals are moving toward a better balance,” but warned that a rate cut was not imminent.
“In considering adjustments to the target range for the federal funds rate, the Committee will carefully evaluate available data, evolving prospects, and the balance of risks,” the statement said. “The Committee does not believe it is appropriate to lower the target range until there is greater confidence that inflation is on a sustained path toward 2 percent.”
The Fed’s fight against inflation is weighing heavily on middle Americans.
In December, a majority of Fed officials said they expected rates to fall to 4.6% by the end of 2024, suggesting at least three quarter-point rate cuts this year. Policymakers also agreed to further rate cuts in 2025 and 2026.
“If the economy performs broadly as expected, it would be appropriate to begin tapering policy restraints at some point this year,” Chairman Jerome Powell said at a news conference after the meeting in Washington. “However, since the pandemic, the economy has surprised forecasters in many ways, and continued progress toward the 2% inflation target is not guaranteed.”
meanwhile inflation has subsided According to the latest data from the Labor Department, labor costs have increased by 3.4% in recent months compared to the same period last year.
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Policymakers have sharply raised interest rates over the past two years, approving 11 hikes in hopes of curbing inflation. cool the economy. In just 16 months, interest rates rose from near zero to more than 5%, marking the fastest pace of tightening since the 1980s.
Rising interest rates tend to raise interest rates on consumer and business loans, forcing employers to cut spending and slowing the economy. Rising interest rates have pushed the average interest rate on a 30-year mortgage above 8% for the first time in decades. Borrowing costs for everything from home equity lines of credit to auto loans and credit cards have also skyrocketed.
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However, the rapid rise in interest rates has not stopped consumers from spending and businesses from hiring.
The labor market continues to move at a healthy pace; Employers added 216,000 people New employees in December. The number of job openings remains high, and the unemployment rate continues to hover around 3.7%.
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This is a developing story. Please check back for the latest information.
