analyst: Daniel MolnarSenior Macroeconomic Analyst at Macronom Institute
As expected, the institution that plays the role of the US central bank did not change interest rates, so that the base interest rate in the largest economy in the world remained in the range of 5.25-5.5 percent.
In this announcement, the Fed emphasized this
Economic activity continued to grow at a moderate pace, with employment rising and the unemployment rate remaining low, while inflation, although slowing, remains above the central bank's target.
On the other hand, he did not provide substantive guidance on the expected interest rate path during Wednesday's meeting either.
Is interest rate policy expected to be more stringent than the current policy?
At the same time, it was emphasized in the announcement that the Central Bank is awaiting additional data, proving that inflation is sustainably approaching the 2 percent target. Policymakers' expectations for interest rates have not changed since December, and 9 out of 19 experts expect 3 rate cuts this year, so this also becomes the average forecast.
But the change is that the number of policymakers who expect a tighter interest rate policy by the end of the year has risen from 8 to 9. Based on interest rate forecasts, this time next year it will be 3–This may be followed by 4 interest rate cuts.
The tone was lighter than expected, but the timing of the easing is questionable
In the press conference held after the interest rate decision, Fed Chairman Jerome Powell did not give a clear indication about the exact date when easing could begin, but stressed that they are waiting for more information about the development of inflation, and even refers to the decision. In July, unlike previously expected in June. However, the tone of the press conference was generally more relaxed than expected, and the higher-than-expected deterioration of the currency in recent months was not given much importance.
New Fed forecasts for US economic indicators
In parallel with the interest rate decision, the central bank also issued its latest forecasts, in which it significantly revised the economic outlook upward, while leaving its inflation forecasts generally unchanged. The Fed expects an expansion of 2.1 percent this year, compared to 1.4 in the December 2023 forecast, which could slow to 2 percent in 2025 and 2026. Inflation could reach 2.4 percent this year, 2.2 percent next year, and 2. percent in 2026.
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Cover Photo:MTI/EPA/Michael Reynolds
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