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The Federal Open Market Committee (FOMC), the Federal Reserve body responsible for US monetary policy, has decided to keep interest rates at 5.25%-5.50%, the highest level since 2001; the decision was in line with analysts’ expectations and was unanimous (12-0).
Since March 2022, it is the second time that the US Central Bank has decided to keep interest rates unchanged; in the other eleven meetings, a rate increase was always decided to combat inflation. Interest rates were lowered to 0-0.25% in March 2020, to combat the negative effects of the coronavirus pandemic on the US economy, and then progressively raised since last year.
However, this is not the end of the squeeze. By the end of the year, 12 governors “expect” rates to rise to 5.50-5.75%, while only seven believe they will remain at the current level. These are indications not very different from those provided in June, when however two central bankers imagined two more increases, instead of one, while one of the members of the monetary policy committee thought it was necessary to bring them to 6-6.25%.
Furthermore, the squeeze could last longer. For the end of 2024, the governors – through the “dots” published every three months, the points with which they indicate their rate estimates – indicate rates at 5-5.25%, while in June the average was aiming for 4.50-4.75 %. It is therefore possible that the first next cut will be decided at the end of next year.
On the contrary, the cuts will be decidedly more incisive in 2025. Even if for that year the division between hawks and doves seems more marked, the indications point to the median at 2.75-3%, while in June they expressed a 3.25- 3.50%. For 2026, the first estimates indicate rates stuck at the same levels as at the end of 2025, which are also higher than the long-term value, considered “neutral” – neither accommodating nor restrictive – and indicated, once again, at 2.5 %.
2023-09-20 18:22:30
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