The Wall Street Journal said that officials of the Federal Reserve (the US central bank) have become less confident about the need for more rate hikes, due to the repercussions resulting from the failure of three banks since last March, which could lead to a credit crunch as banks face higher funding costs.
Federal Reserve officials agreed to hold interest rates steady after 10 consecutive increases but signaled they were prepared to raise rates next month if the economy and inflation dont cool more.
In its post meeting statement, the Fed implied the decision to maintain the benchmark federal-funds rate in a range between 5% and 5.25% might be short-lived.
After holding the fed-funds rate near zero following the Covid-19 pandemic, the Fed had raised the rate at every meeting since March 2022 by a cumulative 5 percentage points, the most rapid series of increases since the 1980s, according to the Wall Street Journal (WSJ).
Officials slowed their increases this year, lifting the rate by a quarter percentage point at their past three meetings, most recently in May.
Wednesday’s decision not to raise rates “is a continuation of that process,” said Fed Chair Jerome Powell at a news conference. Given how much closer officials believe they are to their final destination “it’s common-sense to go a little slower.” Powell and some colleagues had hinted at a potential compromise last month in which officials would forgo a rate rise in June while leaving open the prospect of an increase at their July 25-26 meeting.
Officials raised their forecasts for economic growth and inflation, and lowered their estimates of how high the unemployment rate would be this year.
The Fed Chair said that nonetheless, inflation pressures continue to run high, and the process of getting inflation back down to 2 percent has a long way to go.
Powell has kept the committee united since inflation surged two years ago, with only one dissent since the central bank began unwinding its pandemic-era stimulus policies at the end of 2021. Wednesday’s decision was also unanimous, the WSJ said.
Source: Qatar News Agency