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US Fed holds interest rates steady amid economic uncertainty

01 Aug '24
2 min read
US Fed holds interest rates steady amid economic uncertainty
Pic: Adobe Stock

Insights

  • US Fed's Federal Open Market Committee (FOMC) has decided to keep the federal funds rate steady at 5.25-5.5 per cent, citing ongoing economic expansion, moderated job gains and slightly elevated inflation.
  • While progress has been made towards the 2 per cent inflation target, uncertainty remains, and the Committee is cautious about reducing rates prematurely.
In its latest policy meeting, the Federal Reserve's Federal Open Market Committee (FOMC) has decided to maintain the target range for the federal funds rate at 5.25 to 5.5 per cent.

Recent economic indicators suggest that while the economy continues to expand at a solid pace, job gains have moderated, and the unemployment rate has edged up, though it remains relatively low. Inflation, which has been a significant concern, has eased over the past year but remains somewhat elevated. Despite this, the Committee has observed further progress towards its long-term inflation target of 2 per cent, the FOMC said in a statement.

The Committee highlighted that the risks to achieving its employment and inflation objectives are becoming more balanced, yet the economic outlook remains uncertain. As such, the Committee is cautious about making any premature changes to the federal funds rate. The Committee does not foresee a reduction in the target range until it is more confident that inflation is moving sustainably towards the 2 per cent objective.

In addition to maintaining interest rates, the Fed will continue to reduce its holdings of Treasury securities, agency debt, and agency mortgage-backed securities. This is part of its broader strategy to support its dual mandate of promoting maximum employment and stabilising prices.

The FOMC emphasised its commitment to monitoring a wide range of economic indicators, including labour market conditions, inflation pressures, and financial developments, to inform its future decisions. The Committee remains prepared to adjust its monetary policy stance if new risks emerge that could threaten its goals.

Fibre2Fashion News Desk (KD)

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