Federal Reserve: Interest rates stable at 5.25%-5.50%, but tightening continues

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The Federal Open Market Committee, the Federal Reserve responsible for monetary policy in the United States, decided to keep interest rates at 5.25% to 5.50%, the highest level since 2001; The decision was in line with analysts’ expectations and was unanimous (12-0).

Since March 2022, this is the second time that the US central bank has decided to keep interest rates unchanged; At the other eleven meetings, a decision was always made to increase the interest rate to combat inflation. Interest rates were reduced to 0-0.25% in March 2020, to combat the negative effects of the Corona virus pandemic on the American economy, and then they were gradually raised since last year.

Stopping is not the end of pressure. By the end of the year, 12 governors “expect” interest rates to rise to 5.50-5.75%, while only seven believe they will remain at the current level. These indicators are not much different from those presented in June, when two central bank governors envisaged two more increases, instead of one, while one member of the Monetary Policy Committee considered it necessary to raise it even to 6-6.25%. “We want to see better results — before coming to the conclusion” that the current level of interest rates is sufficient, Chairman Jerome Powell said at a news conference. Public relationsHence, an expected rise in November or December remains possible for now. Decisions will continue to be made “meeting by meeting” based on data.

Moreover, the pressure can last longer. For the end of 2024, the governors indicate – through the “points” published every three months, the points by which they indicate their estimates of the cost of official credit – to rates at 5-5.25%, while the mediation in June targeted 0.50. Higher point below, to 4.50-4.75%. Therefore, it is possible that the first next cut will be scheduled for the end of next year.

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For 2025, indicators indicate an average of 3.75-4%, while in June they expressed 3.25-3.50%. For 2026, the first estimates suggest cuts of one percentage point, amounting to 2.75-3%, which is also higher than the long-term value, which is considered “neutral” – neither tolerant nor restrictive – and will be confirmed in 2026. 5% even if Some conservatives revised their ratings upward.