Feds take a break in rate climbing
The Federal Reserve has decided not to further increase interest rates. The American consortium of central banks has raised borrowing costs in eleven steps over the past year and a half to curb strong price increases. Now, the Fed is stopping the increase in interest rates for the second time this year.
Interest rates in the US are now at the highest level since 2001. By making borrowing more expensive, the Fed is curbing demand in the economy, which should help slow down price increases. The danger, however, is that the US economy could enter a recession due to declining demand.
But the new forecasts from the Fed indicate that the nineteen policymakers have become more optimistic about the economic outlook. For the coming years, they expect stronger economic growth than they initially projected. At the same time, they anticipate that unemployment will be lower than previously thought.
This also gives the Fed more room to bring down inflation, which still remains well above the desired 2 percent. The new forecasts published by the central bank consortium also reveal that a large majority of Fed policymakers support another interest rate hike later this year. They also expect to reduce interest rates less rapidly next year than in previous outlooks.
The pause in the series of interest rate hikes did not come as a big surprise. In the financial markets, the focus is primarily on the explanation that Fed Chairman Jerome Powell will provide later in the evening regarding the interest rate decision. In this, he may give hints about future interest rate policies in the US.