2024-02-21 19:17:11
Comment
Bild: © qingwa / Fotolia.com
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According to the minutes, some members of the FOMC expressed concern that progress in combating inflation is stagnating. Most members pointed to the risk that interest rates could be cut too quickly. However, there are unlikely to be any further interest rate increases; according to the Fed, interest rates have probably reached their peak in this cycle.
As expected, the US Federal Reserve Bank left the key interest rate unchanged as part of its interest rate decision on January 31st. The key interest rate therefore remains in a range of 5.25% to 5.50%. The Fed already rejected any imminent interest rate cuts when making its interest rate decision. It is not assumed that an interest rate cut is appropriate “as long as there is no greater confidence that inflation will move sustainably towards 2%,” it said in the statement on the interest rate decision. At the press conference, Fed Chairman Jerome Powell said that there probably wouldn’t be a rate cut in March, but that almost all members of the Federal Open Market Committee expect cuts later in the year.
According to the latest statements from Fed Chairman Jerome Powell, the market had already largely priced out interest rate cuts in the next two interest rate decisions in March and May. The market is now not expecting the first interest rate cut until June, as the CME FedWatch tool shows. In the fight against high inflation, the US Federal Reserve raised the key interest rate by a total of 5.25 percentage points between March 2022 and July 2023, the fastest rate in around 40 years.
Conclusion/market reaction: With the minutes of the interest rate decision published in the evening, the US Federal Reserve once again signaled that interest rate cuts are unlikely to occur any time soon. Instead, FOMC members are concerned that inflation could remain too high. In fact, inflation data released last week had shown that the inflation rate may be stabilizing in the 3% range and core inflation just below 4%. As long as this is the case, there is no room for the Fed to cut interest rates. However, the price reactions to the Fed minutes published in the evening were small because there was hardly any new information in them.
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