Monetary policy US Federal Reserve not touching key interest rates for the time being
As expected, the US Federal Reserve is keeping the key interest rate at its highest level for more than 20 years. It remains in the range of 5.25 to 5.5 percent, as announced by the Federal Reserve Board in Washington.
31.07.2024, 20:01
31.07.2024, 20:52
SDA
At the same time, however, the Fed signaled that a rate cut is becoming more likely. Commercial banks can borrow central bank money at the Fed's interest rate.
The central bank of the world's largest economy has raised its key interest rate by more than five percentage points at a record-breaking pace since March 2022 in the fight against inflation. However, it did not turn the interest rate screw again in several consecutive decisions.
Reading between the lines
Many analysts believe that a rate cut is possible at the Fed's next decision in September. As usual, the central bank has kept a low profile. However, the subtleties of its wording on the current situation allowed the interpretation that an interest rate cut is approaching.
It has now emphasized that it is keeping an eye on the risks associated with both the development of inflation and the weakening of the economy. Previously, the central bank council had primarily referred to the risk of inflation.
The Fed also referred to progress towards the inflation target of two percent. At the same time, however, it also qualified that an interest rate cut was only on the cards once there was certainty that it was moving towards the target. The Federal Reserve is therefore ultimately keeping all options open for September.
Economic data becoming more favorable for a rate cut
In the USA, the upward pressure on prices has weakened recently. This basically gives the Federal Reserve more room for maneuver to cut interest rates. At the same time, there are signs that the economy is cooling down in some areas - and could make good use of lower interest rates to boost it again. Consumer spending - the engine of the US economy - has shown some alarming signs in recent months.
