U.S. economic health

Fed foe inflation forces U.S. to hold rates and they will likely remain high for some time yet!

The Fed have deliberated over ‘transitory’ inflation – (they got that wrong). They have teased us about when rates will be cut (still waiting). And now we are told no rate cut but: ‘the next rate move is unlikely to be up!’

Probably better to say and do nothing at all? Are you a bit confused? I am.

The U.S. central bank has decided to maintain interest rates, reasoning a ‘lack of further progress’ in reducing inflation. This leaves the Federal Reserve’s key rate at its highest in over two decades, between 5.25% and 5.5%.

Sticky problem

By maintaining high borrowing costs, the Federal Reserve seeks to decelerate the economy and reduce inflationary pressures. However, this also increases the financial burden on businesses due to elevated borrowing expenses and on consumers through higher mortgage and loan payments.

However, as U.S. inflation remains more stubborn than anticipated (and that is being generous), the Fed is now being closely scrutinized over its forthcoming actions.

Analysts, who had predicted rate reductions early this year, have had to delay their projections, with some even suggesting a potential rate hike.

No rate cuts but ‘hike’ unlikely – that’s helpful then

Following the declaration, the Fed Chair reportedly expressed his belief that a rate hike is ‘unlikely,’ reiterating the need for more assurance of subsiding inflation before considering a reduction.

‘The decision will truly be data-dependent; it’s going to take longer to reach that point of comfort. I don’t know how long it will take’, he reportedly stated.

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