12 June: Market Remains Hopeful For Rate Cut Later This Year
The US Federal Reserve has held interest rates in a target range between 5.25% and 5.5%, a 23-year high, as the world’s largest economy continues to fight stubbornly elevated inflation, Andrew Michael writes.
The Fed’s rate-setting Federal Open Markets Committee (FOMC) announced today that it would maintain US borrowing costs at the same level as they have been since July 2023.
Explaining its decision, voted for unanimously by the 12-member FOMC, the Fed said: “The Committee judges that risks to achieving its employment and inflation goals have moved toward better balance over the past year. The economic outlook is uncertain, and the Committee remains highly attentive to inflation risks.”
Earlier on Wednesday, official consumer price index (CPI) figures from the US Bureau of Labor Statistics showed that annual US inflation rose by 3.3% in the year to May, down slightly on the figure of 3.4% recorded a month earlier.
The reduction was not sufficient to prompt an interest rate cut as early as today, but commentators are optimistic that the downward direction in the inflation figure will eventually result in a loosening of US monetary policy.
Chris Beauchamp, chief market analyst at online trading platform IG, said: “Just when all hope of a rate cut in 2024 seemed lost, today’s CPI reading has provided fresh reasons to expect a cut this year.”
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