USA: Fed Leaves Rates Unchanged

Only one decline is likely by the end of 2024

Following the June 12 session, the Federal Reserve left the interest rates unchanged, between 5.25% and 5.50%. Indicators are maintained since July 2023.

The rate of inflation has slowed, but is still far from the “physiological” level of 2%. This figure is the target for the Fed. Recent inflation forecasts for 2024 were revised upward from 2.4 to 2.6%.

“Recent indicators suggest that economic activity continues to grow at a rapid pace. Job growth remained strong, and the unemployment rate was low. Inflation has decreased over the past year, but remains high,” the Fed statement says. “The committee aims to achieve maximum employment and inflation rate of 2% over the long term. The Committee believes that over the past year, risks for achieving the employment and inflation goals are balanced. The economic outlook is uncertain, so the Committee keeps watching very closely for inflation risks.”

Thus, rates will remain at their highest level in more than twenty years. Their decline could occur as early as September 2024, if inflation data continues to show an encouraging dynamic. But it’s more likely to happen later, after the November 5 presidential election.

“In considering any adjustments to the target range for the federal funds rate, the Committee will carefully evaluate incoming data, the evolving outlook, and the balance of risks,” the statement notes. “The Committee does not believe it would be appropriate to reduce the target range until it has greater confidence that inflation is moving steadily toward 2 percent.”