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US Federal Reserve Holds Fast On Hiking Interest Rates

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The US Federal Reserve has left interest rates unchanged for another month as inflation levels out near the target for the economy.

The rate setting Federal Open Market Committee decision was unanimous.

The last time rates went up were in March, when the committee triggered a 0.25% increase in March to take the interest rate to 1.75%.

In a statement, the Fed noted most other goods and services other than food and energy had moved close to 2%, which the central bank has already cited as the favoured rate for the US economy.

In the losing term, the Fed wants to push interest rates up, but is wary that moving too fast on an upward curve could trigger higher inflation and even recession.

June increase expected

If rates do not rise, members fear the economy may overheat with excessive wage rises and rising prices.

Fed members have suggested that three or four more hikes are due this year, which would likely hoist the rate to at least 2.5%, but although this was signalled prior to the meeting, this is yet to be confirmed.

However, economists forecast a June interest rate rise, according to the New York Times.

According to the latest official inflation figures, the rate is sitting at 1.9% excluding food and energy.

Fed chairman Jerome Powell is broadly optimistic about the strength of the economy.

Careful monitoring

“In determining the timing and size of future adjustments to the target range for the federal funds rate, the committee will assess realized and expected economic conditions relative to its objectives of maximum employment and 2% inflation,” said the Fed statement.

“This assessment will consider a wide range of information, including measures of labour market conditions, indicators of inflation pressures and inflation expectations, and readings on financial and international developments.

“The committee will carefully monitor actual and expected inflation developments relative to its symmetric inflation goal. The committee expects that economic conditions will evolve in a manner that will warrant further gradual increases in the federal funds rate; the federal funds rate is likely to remain, for some time, below levels that are expected to prevail in the longer run.”
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