The US Federal Reserve (Fed) announced on Wednesday that it would keep its current interest rates unchanged, but the question on many lips is ‘when will it reduce them?’
From March 2022 to July 2023, the Fed raised interest rates 11 times, resulting in a rate range of between 5.25% and 5.50%. The purpose of higher interest rates is to make borrowing more expensive, ideally lessening the strain on inflation. The Fed’s inflation target stands at about 2%.
At the end of last year, bank officials had hinted that interest rates may be cut three to four times in 2024.
The inflation and growth statistics the US central bank is currently evaluating are moving in a favourable direction. On Wednesday, it was revealed that wage increases in the last quarter are at their lowest point since mid-2021.
Moreover, only 107,000 jobs were created in the private sector in January, compared to 158,000 in December.
Most analysts believe these figures may herald the start of interest rate cuts in May.
In a press release following a two-day meeting, the Fed declared on Wednesday evening that the risks to employment and inflation objectives were increasingly in balance.
New data availability, evolving forecasts, and risk balance assessments will be carefully considered in future decisions, it added.
Fed Chair Jerome Powell stressed that the economy continued to develop positively and that there would probably be a cut in interest rates this year.
“Almost all Fed members support this,” he added.
