Fed holds key interest rate and warns on inflation
The US central bank decided to keep interest rates the same because they haven’t seen enough improvement in controlling inflation.
This means the Federal Reserve’s main rate stayed at its highest level in over 20 years, between 5.25% and 5.5%, where it’s been since last July.
The Fed wants to slow down the economy and stop prices from going up too fast by keeping borrowing expensive. But because inflation is staying high longer than expected, people are wondering what the Fed will do next.
Experts who thought the Fed would start lowering rates early this year have had to change their predictions. Some are even suggesting the Fed might raise rates instead.
WATCH: The US Federal Reserve held interest rates steady and signaled it is still leaning towards eventual reductions in borrowing costs despite recent disappointing inflation readings https://t.co/F4ajh1VVo8 pic.twitter.com/pcvAD3akVz
— Reuters Business (@ReutersBiz) May 1, 2024
During a press conference after the decision, Fed chairman Jerome Powell said he didn’t think they would raise rates, but they want to be more sure that inflation is getting better before they decide to lower rates.
“It depends on the data,” Powell said. “It’s going to take more time to feel confident. I don’t know how long it will take.”
In the US, prices went up by 3.5% over the past year until March. That’s a big drop from the 9.1% increase in June 2022, but it’s still higher than the Fed’s goal of 2%, and it’s been going up in recent months.