Fed keeps rates steady, cuts only with solid drop in inflation

The decision of the monetary policy committee with a unanimous vote

With an (expected) unanimous vote, The monetary policy committee of the Federal Reserve (FOMC) has decided to keep the reference rates still stable between 5.25 and 5.50% since “inflation remains at high levels although it has fallen in the last year”. However, the final statement of the meeting underlines how the US economy has “grown at a sustained level, and the unemployment rate has remained low”.

The FOMC “believes that the risks linked to the achievement of employment and inflation objectives are reaching a better balance” but “the economic outlook is uncertain and the Committee remains very attentive to inflation risks”. “When considering possible adjustments” – it is explained – “the Committee will carefully evaluate the incoming data, the evolution of the outlook and the balance of risks”. But the FOMC “believes that it will not be appropriate to reduce the target range until it has gained greater confidence that inflation is moving sustainably towards 2%.” The process of reducing the balance sheet of the US central bank was also confirmed.

In a press conference, Fed President Jerome Powell underlined that the US economy “surprised” with its resilience even in the face of rate increases but the Fed – while aware of the risks of rates being too high for a long time or cut too soon – is taking its time before to the hypothesis of a U-turn because “we want greater confidence and to see more positive data” on the decline in inflation, “not better data, but lasting data. Six months of good data on inflation are sending us a real signal” but “The issue is whether we can have confidence that we are sustainably getting to the 2% target.”



Source-www.adnkronos.com