Sep 20, 2023 at 8:30 PM Update: an hour ago
The US Federal Reserve left its key interest rate unchanged on Wednesday. The umbrella organization of central banks has made borrowing more expensive in eleven steps over the past year and a half in the fight against inflation. Policymakers do expect another interest rate increase this year.
The key interest rate in the United States is now at its highest level since 2001, at a range between 5.25 percent and 5.5 percent.
By making borrowing more expensive, the Federal Reserve (Fed) slows down demand in the economy. This should ensure that prices no longer rise so rapidly. The danger is that the American economy could end up in a recession due to declining demand.
But the Fed’s new forecasts show that the nineteen policymakers have actually become more optimistic about the economic prospects. They are therefore counting on stronger economic growth in the coming years than before. At the same time, they expect unemployment to be lower than they previously thought.
This gives the Fed more room to reduce inflation, which is still well above the desired 2 percent. The new forecasts published by the central banking umbrella organization show that a large majority of Fed policymakers are in favor of another interest rate increase this year. They also expect to reduce interest rates less quickly next year than in previous forecasts.
The pause in the series of interest rate increases did not come as a big surprise. In financial markets, attention is mainly focused on the explanation that Fed Chairman Jerome Powell will give later on Wednesday evening on the interest rate decision. In it he may give hints about future interest rate policy in the US.
Image: AFP
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2023-09-20 18:30:59
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