US interest rates held by Fed after 3 months of underwhelming inflation figures

The Federal Reserve, the central bank of the United States, has decided to maintain its high interest rates at 5.25% to 5.5%. This decision comes despite previous indications in January that rate cuts were on the horizon. However, the progress towards lowering rates and making borrowing more affordable has been hindered by the rising inflation in the country.

In the latest news, the popular digital currency Bitcoin has experienced a difficult month and things have only worsened. It is now possible that rate cuts may only occur once in 2024, which is less than originally expected. This is due to the belief that high interest rates are necessary to withdraw money from the economy and slow down the increase in prices.

Recent data from the Fed has shown that inflation has reached 3.5% in March, up from 3.2% in February and 3.1% in January. This is above the Fed’s target for inflation and higher than anticipated. However, there is no guarantee that inflation will decrease, as Fed chair Jerome Powell has cautioned that “further progress in bringing it down is not assured and the path forward is uncertain.”

It will take more confidence in controlling inflation before policymakers will consider any rate cuts. According to Mr. Powell, this confidence will take “longer than previously expected” to gain. He also stated that “in recent months, there has been a lack of further progress towards the Committee’s 2% [inflation] objective.”

This suggests that interest rates will remain high for a longer period of time, but Mr. Powell has stated that another increase is unlikely. “The committee does not expect it will be appropriate to reduce the target range [of interest rates] until it has gained greater confidence that inflation is moving sustainably toward 2%,” the Fed said.

When asked about the possibility and timing of rate cuts, Mr. Powell declined to comment, saying “there are paths to cutting, there are paths to not cutting.” Similar to the UK and the EU, the US is also aiming to bring inflation down to 2%. The Bank of England will face a similar decision next week when it announces its own interest rate decision.

Initially, it was anticipated that a rate cut would occur in May, but according to data from Refinitv, the market is now expecting it to happen in August. Unlike the UK, the US interest rate is a range that guides lenders, rather than a single percentage.