US Federal Reserve Leaves Interest Rates Unchanged, Maintains Optimistic Outlook on Economy
The US Federal Reserve has announced its decision to keep interest rates unchanged, marking the third consecutive meeting without a rate hike. The move was widely anticipated by markets, and the Fed’s statement signaled that it is still likely to lower rates later this year.
Fed Maintains Current Interest Rate Range
The Fed decided to maintain the target range for the federal funds rate at 4.25 to 4.50 per cent, citing its dual goals of maximum employment and inflation at the rate of 2 per cent over the longer run. This decision was made in support of the US economy, which has been experiencing a slowdown in recent months.
Outlook for Rates Remains Optimistic
The Fed’s forecast for interest rates remains optimistic, with officials still projecting a range of 3.75 to 4.0 per cent by the end of the year. This suggests that the Fed is likely to cut rates by a quarter point two times later this year.
GDP Growth and Inflation Projections
Fed officials lowered their projections for gross domestic product (GDP) growth in 2025 to 1.7 per cent from 2.1 per cent, while raising their forecasts for consumer price growth this year to 2.7 per cent from 2.5 per cent.
Securities Holdings to Slow Pace of Decline
The Fed also announced that it has decided to slow the pace of decline of its securities holdings by reducing the monthly redemption cap on Treasury securities from US$25 billion to US$5 billion beginning in April. The monthly redemption cap on agency debt and agency mortgage-backed securities will remain at US$35 billion.
Fed’s Next Meeting
The Fed’s next monetary policy meeting is scheduled for May 7, with CME Group’s FedWatch Tool currently indicating a 79.9 per cent chance that the central bank will once again leave rates unchanged. However, the tool suggests that there is a better chance that the Fed will lower rates at its June or July meetings.
Conclusion
The US Federal Reserve’s decision to leave interest rates unchanged is a testament to its commitment to supporting the US economy. The Fed’s optimistic outlook on the economy and its decision to slow the pace of decline of its securities holdings are positive signs for the market.
FAQs
- What is the current interest rate range maintained by the Federal Reserve?
The current interest rate range is 4.25 to 4.50 per cent. - What is the Fed’s projection for interest rates by the end of the year?
The Fed is projecting a range of 3.75 to 4.0 per cent by the end of the year. - What is the Fed’s outlook on GDP growth and inflation?
The Fed is projecting GDP growth of 1.7 per cent in 2025 and consumer price growth of 2.7 per cent this year. - What is the Fed’s decision on securities holdings?
The Fed has decided to slow the pace of decline of its securities holdings by reducing the monthly redemption cap on Treasury securities from US$25 billion to US$5 billion beginning in April.