Helena Lyng Blak
3 weeks ago

The Fed Maintains Interest Rate

Federal Reserve holds rates steady amid economic progress and persistent inflation challenges.
maxxyustas / DepositPhotos
maxxyustas / DepositPhotos

On Wednesday, May 1, 2024, policymakers at the United States’ central bank met expectations by maintaining the current interest rates.

The Federal Reserve announced it would be staying put on interest rates in a statement following the most recent meeting of the Federal Open Market Committee (FOMC), keeping them at a target range of 5.25% to 5.50%. 

The Fed further stated it would be continuing to reduce its holdings of Treasury securities, agency debt, and agency mortgage-backed securities as well as slow the pace of decline of its securities holdings by lowering the monthly redemption cap from $60 billion to $25 billion on Treasury securities.

In Fed Chair Jerome Powell’s remarks following the FOMC statement, he opened stating that, “the economy has made considerable progress,” highlighting a substantial easing of inflationary pressures and a strong labor market. 

Powell nevertheless asserted that inflation remains “too high.” He noted that further progress in reducing inflation is not assured, and the path forward remains “uncertain,” stating, “We have stated that we do not expect it will be appropriate to reduce the target range for the federal funds rate until we have gained greater confidence that inflation is moving sustainably toward 2%.”

He continued: “So far this year, the data have not given us that greater confidence. In particular, readings on inflation have come in above expectations. It is likely that gaining such greater confidence will take longer than previously expected. We are prepared to maintain the current target range for the federal funds rate for as long as appropriate.”

Ultimately, during the Q&A part of the session, Powell returned to the topic of the Fed’s relationship with political and ideological independence, saying, “We are always going to do what we think the right thing for the economy is.”

“It is hard enough to get the economics right here,” Powell explained. “If we were to take on a whole nother set of factors and use that as a new filter, it would reduce the likelihood that we would actually get the economics right.”

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