2023-06-15 01:11:25
The Fed’s monetary policy committee (FOMC), meeting since Tuesday morning, unanimously decided to keep the main key rate within the range of 5.00-5.25%.
This break should allowassess additional information and its implications for monetary policy
detailed the Fed in a press release.
Nevertheless, the institution’s officials mostly plan to raise rates further by the end of 2023, up to 5.50-5.75%, but one of them even sees them climbing up to 6, 00-6.25%. However, two members of the committee expect rates to remain at this level. Rates should come down in 2024, to 4.25-4.50% according to the majority of officials.
The FOMC has also very slightly lowered its inflation forecast this year in the United States, to 3.2% against 3.3%, but has, on the other hand, raised its forecast for growth of the domestic product to 1.00%. gross (GDP) US for 2023, against 0.4% expected in March.
Inflation lower than expected
The debate among Fed officials had begun on Tuesday morning, two hours after the release of the latest US inflation figures, which showed that consumer price inflation had slowed sharply in May, to 4.0% on one year, against another 4.9% the previous month, according to the CPI index, the lowest level since March 2021.
Inflation is now half as high in the United States as in June 2022, when the peak of 9.1% was reached. But this is still well above the 2.0% targeted by the Fed, maneuvering to extinguish this surge in prices, but the institution is beginning to see its objective.
After ten increases in a row, by a total of five percentage points, several of its officials were in favor of this break. That would allow more data to be observed before making decisions on the extent
increases still necessary, explained in particular Philip Jefferson, one of the governors of the Fed, and soon vice-president if the Senate confirms his appointment.
In addition, this pause should make it possible to avoid weighing too heavily on consumption and investment, and therefore on economic activity, and, above all, to avoid a recession.
Tight labor market
If the last CPI index was published on Tuesday, the Fed favors another measure of inflation, the PCE index, whose data for May will be published at the end of June and which had started to rise again in April, to 4, 4% over one year.
As for wholesale prices in the United States, which measure inflation on the producer side, they fell by 0.3% in May compared to April, and, over one year, slowed sharply, to 1.1% against 2 .3% the previous month, according to figures released Wednesday by the Labor Department.
The labor market remains tight, with persistent labor shortages, although the situation is improving. Job creations in May were much higher than forecast, but the unemployment rate rose more than expected, to 3.7%. Weekly jobless claims were in early June at their highest since October 2021.
Inflation, labor market figures and credit conditions will determine if the FOMC is done raising rates or if further tightening is needed
, said Rubeela Farooqi, chief economist for HFE. However, it anticipates a maintenance of rate at the current level, at least until the end of the year
.
Fed officials will also update their March forecasts for GDP growth, unemployment, inflation, and say how far they expect to hike rates.
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