After increasing the interest rates for 10 consecutive times, the US Federal Reserve has not made any change in the interest rates. Means the pause button of interest rates has been pressed, but it is not a full stop. After two days of the meeting, the Fed’s policy remained in line with the expectations of the market and economists, but one thing that has turned the tide from the Fed’s relief is the commentary of Fed Chairman Jerome Powell, in which he said That interest rates will increase further this year.
Pause as expected, but…
When the Federal Open Market Committee (FOMC) started the meeting on June 13, it was already predicted what the Fed’s move was going to be and that is what happened. The Fed kept the federal funds rate on hold between 5% and 5.25%, its highest level since 2007. But has the trend of interest rate hike stopped? So on this, Jerome Powell said that it is not so, this year there will be at least two 25 basis point hikes, that is, 50 basis point increase in interest rates will be further this year. Due to which the interest rates in America will reach 5.6%, which was not expected by any economist or investor.
‘Full effect of strictures yet to be seen’
The Fed chairman said that ‘we have increased our policy rates by 5 percentage points. We have continued to reduce our security holdings rapidly. The Fed chairman said during the press conference that ‘we have completed the work to a large extent, but the full effect of our strictness has not been felt yet’.
The Fed said in its statement that ‘our fight is about inflation, which has shown promising signs in the past, it will take us another 6 weeks to know the effect of the decision taken regarding our policy.’
The Fed said that tighter credit conditions for households and businesses are expected to have an impact on economic activity and hiring and inflation, the extent of these effects is not yet decided.
US retail inflation fell from 4.9% before the Fed’s policy to 4% in May, which is the lowest in two years. Apart from this, the inflation rate of core service has also come down to the lowest in 15 months. But the Fed believes that inflation is still above its target.
4 more policy meetings this year
The Fed has four more meetings to be held this year. The next meeting will be held during July 25-26. After this in September, again between October/November and the last meeting will be held in December. Policy rates are to be increased 2 times in these four meetings, now it remains to be seen what is the Fed’s strategy in the remaining 2 meetings, will Fed cut policy rates this year.
