The Federal Reserve keeps interest rates unchanged in the United States

The United States Federal Reserve (Fed) announced this Wednesday that it is maintaining interest rates in their current range and stated that it does not expect it to be appropriate to reduce the target range until we are confident that inflation is moving sustainably towards 2%.

“In assessing the appropriate stance of monetary policy, the Committee will continue to monitor the implications of incoming information for the economic outlook,” the US regulator noted after maintain rates within the range of 5.25% and 5.5%, their highest level since 2001.

In the statement, the regulator warned, as it usually does after each meeting, that it is “prepared to adjust the monetary policy stance as appropriate if risks arise that could prevent the achievement of the objectives” of returning inflation to 2%.

“The Committee's assessments will take into account a wide range of information, including readings on labor market conditions, inflationary pressures and inflation expectations, and financial and international developments,” the statement said.

According to the Fed, Recent economic indicators suggest “that economic activity has been expanding at a solid pace,” that employment growth has moderated, but remains strong, and that inflation “has declined over the past year, but remains high.”

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“The Committee seeks to achieve maximum employment and inflation at a rate of 2% over the long term. The Committee believes that the risks to achieving its employment and inflation goals are becoming better balanced. The economic outlook is uncertain and the Committee continues very attentive to inflation risks,” the statement said.

The members of the Federal Open Market Committee (FOMC), the body in charge of deciding whether or not to raise rates, made this decision after concluding a two-day meeting.

The Fed's decision comes a few days after the United States announced that it closed 2023 with gross domestic product (GDP) growth of 3.1%. thanks to increased consumer spending despite inflation.

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The figure is higher than estimated by economists and higher than the 2.1% of the growth recorded in 2022, the year in which the world's first economy suffered a technical recession. GDP is one of the data that the regulator closely analyzes, along with inflation, which in December abandoned its downward streak.

Prices rose three tenths year-on-year and inflation closed the year at 3.4%. This indicator had been falling in year-on-year terms since October and the rise represented a setback for the Fed's objectives of returning it to 2%.

The US labor market is another of the data analyzed by the Fed and, far from cooling, it remains solid.

In December, the net creation of new jobs rose again and 216,000 positions were created, 43,000 more than those created a month earlier, and the unemployment rate remained at 3.7%, a figure that does not seem to indicate that The labor market has suffered from the rate increases.

'Fed will lower interest rates at some point this year'

Following the announcement, the president of the US Federal Reserve (Fed), Jerome Powell, said this Wednesday that If the economy evolves “broadly as expected, it will probably be appropriate to begin tapering policy sometime this year.”

“We think our policy rate is probably at its peak for this tightening cycle,” he noted.

“The economic outlook is uncertain and we remain very attentive to inflation risks,” said Powell, who explained that the regulator will continue to make its decisions “meeting after meeting.”

The Fed chairman stated that they do not need “better data” but rather “a continuation of the good data we have been seeing.” “We have six months of good inflation data, the question really is: Are six months of good inflation data sending us a real signal that, in fact, we are on a sustainable path to 2% inflation? That's the ask and the answer will come with more data,” he insisted.

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The Fed is aware, he added, that “cutting rates too early or too much could result in a reversal of progress” and would lead to “tighter policy to get inflation back to 2%.”

EFE