8 ay önce

US Fed holds rates steady despite inflation concerns

The Federal Reserve's unexpected decision to maintain steady interest rates at 5.25-5.50 percent dashed hopes for a summer cut, prompting questions about the possibility of an impending economic slowdown.

Reuters

Since rolling back the policy in 2022, the Fed has steadily reduced its holdings. / Photo: Reuters

The US Federal Reserve has held interest rates steady for a sixth straight meeting, keeping the level at a 23-year high to fight stubborn price increases.

At the end of a two-day meeting, central bank policymakers decided on Wednesday unanimously that the Fed would keep the benchmark lending rate unchanged at 5.25-5.50 percent, citing a "lack of further progress" towards its two percent inflation target.

"The economic outlook is uncertain, and the Committee remains highly attentive to inflation risks," said the Fed in a statement.

For months, the US central bank has maintained interest rates at an elevated level to cool demand and rein in price increases — with a slowdown in inflation last year fueling optimism that the first cuts were on the horizon.

But price increases have accelerated, throwing cold water on hopes of a summer rate cut.

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Growing possibility of cuts

The Fed also announced on Wednesday that, starting in June, it would slow the pace of decline of its securities holdings, by "reducing the monthly redemption cap on Treasury securities from $60 billion to $25 billion."

As hope dwindles for rate reductions in the first half of the year, the Fed faces a growing possibility that eventual cuts will coincide with the run-up to November's presidential election.

The timeline may prove uncomfortable given that the Fed, as the independent US central bank, seeks to avoid any appearance of politicisation.