High interest rates in the United States remain unchanged, Federal Reserve decides

The United States central bank keeps interest rates unchanged. The Federal Reserve (Fed) announced this on Wednesday. This means that interest rates remain within the range of 5.25 to 5.5 percent, the highest level since 2001.

Central banks tinker with interest rates to influence inflation. By raising interest rates, borrowing money becomes more expensive and there will be less money in circulation. This slows down economic activity and thus also price increases. The Federal Reserve, like the European Central Bank (ECB) – but unlike most other countries – aims for an inflation rate of 2 percent.

The American interest rate decision is in line with the expectations of most economists, due to disappointing inflation figures. Inflation fell sharply last year, but has fluctuated just above 3 percent since June 2023. Since January, inflation in the US has risen by 0.4 percentage points to 3.5 percent. The market was not surprised after the interest rate announcement: Wall Street indices remained stable in the following minutes.

Fed Chairman Jerome Powell said at a press briefing in Washington on Wednesday that it is “unlikely” the central bank will raise interest rates. That caused great relief on Wall Street. Shortly after the announcement, the most important American stock market indicators shot up. Stock prices have been under pressure recently due to investor concerns about the Fed’s interest rate policy.

Central banks have been ready to cut interest rates for months, but that decision has been postponed. In December, Fed officials said they expected three interest rate cuts in 2024, but stock exchange traders have now adjusted their expectations to one or two interest rate cuts. The ECB also decided in April to keep interest rates at 4 percent, but again hinted that this could change soon.

Also read
Stubborn inflation is causing headaches for central banks

To share

Email the editor