MoneyNewsTop NewsWorld

Fed kept the base rate in the range of 1.5-1.75%

UNITED STATES (OBSERVATORY) – The Federal Reserve System (FRS) of the United States, following the May 1-2 meeting, decided to keep the federal funds rate in the range of 1.5-1.75% per annum, the communiqué of the Federal Committee for open markets (FOMC).

The decision of the FOMC coincided with the expectations of the vast majority of economists and market participants.

At the same time, the Fed pointed out that inflation in the US in the medium term will rise close to the target level of 2%.

“The information received after the March FOMC meeting points to the continued strengthening of the labor market and the growth of economic activity at moderate rates,” the communique said. At the previous meeting, the Fed gave the same assessment of the situation in the economy.

“Growth in employment was strong, on average, in recent months, and unemployment remained low,” the Fed notes. In this sentence, the words “on average” were added.

At the same time, recent data indicate that the pace of growth in consumer spending has slowed compared to the strong performance of the fourth quarter, while business investment in fixed assets continued to increase significantly. “In annual terms, both the overall inflation rate and inflation without taking into account food and fuel prices have become closer to 2%,” the document says. This paragraph changed in comparison with the March text.

“Market indices of inflationary compensation remain low,” the leaders of the Federal Reserve believe. “The indicators of long-term inflation expectations, based on surveys, as a whole have slightly changed.”

“The FOMC’s duty is to promote maximum employment and price stability, and expects that with further gradual adjustment of the nature of monetary policy, economic activity will increase at a moderate pace in the medium term and labor market indicators will remain strong,” the statement said. From this paragraph, the proposal was excluded that “the forecast for the economy has intensified in recent months.”

“It is expected that inflation in annual terms will be close to the target FOMC level of 2% in the medium term. The risks for the economic forecast look approximately balanced,” the document says. In the March text, the second sentence ended with the phrase “however the FOMC closely monitors inflation rates,” which is now missing.

“Taking into account the past and expected conditions in the labor market and inflation, the committee decided to maintain the target interest rate range for federal credit facilities in the range of 1.5-1.75% .The monetary policy policy remains stimulating, supporting a strong labor market situation and a steady return to 2 percent inflation,” the Fed said.

“The committee will closely monitor the actual and expected change in inflation relative to the target level.The Fed expects that the nature of changes in the economic environment will give rise to a further gradual increase in the interest rate.For some time, the interest rate is likely to remain below the level that will prevail in However, the actual trajectory of interest rate changes will depend on the economic forecast based on the incoming data,” explains the Fed.

The decision to preserve the parameters of monetary policy was unanimously adopted by all eight members of the FOMC, led by the Chairman of the Federal Reserve, Jerome Powell.

The next meeting of the committee is scheduled for June 12-13 and will be followed by a press conference of J. Powell, as well as the publication of updated economic forecasts.