USA: Fed Leaves Interest Rates Unchanged
The July Federal Reserve meeting left the cost of money unchanged as expected
At its July meeting, the Federal Reserve decided to keep interest rates steady, respecting analysts’ expectations. The last time the institution changed the cost of money was back in July 2023, when it decided to raise it by 25 basis points, bringing it to between 5.25% and 5.5%, the highest in 23 years.
As the Fed said in a statement, “recent indicators suggest that economic activity continues to grow at a confident pace. Job growth has slowed, and the unemployment rate has increased, but remains low. Inflation declined last year, but remains quite high. Recent months have seen further progress towards the 2% inflation target set by the Committee.”
The Fed’s goal is to maximize employment by setting inflation at 2% over the long term. “The economic outlook is uncertain, and the Committee is alert to risks that affect both aspects of its dual mandate,” the bank further wrote in a statement. “In support of his goals, the Committee decided to raise the target range for the federal funds rate to 5.25 and 5.5 percent. In considering any adjustments to the target range for the federal funds rate, the Committee will carefully evaluate incoming data, the evolving prospect, and the balance of risks.”
The Committee also said it would continue to reduce its holdings of Treasury securities, agency debt, and agency mortgage-backed securities.
Therefore, all eyes are on the September 17-18 meeting, where the expected rate cut could take place, even if President Jerome Powell will want to keep his “hands free.”