US Federal Reserve votes to leave interest rates unchanged
The Fed defies expectations of a rate cut and keeps interest rates steady.
The US Federal Reserve has decided to leave interest rates unchanged after its latest Federal Open Market Committee (FOMC) meeting. Despite weak data about the US economy, the Fed will keep interest rates in the range of 2.25-2.5%.
Why did the Fed leave rates unchanged?
The Fed was under increased pressure, especially from US President, Donald Trump, to cut interest rates to boost the economy. Despite the pressure, the Fed left interest rates unchanged because it believes the US labour market ‘remains strong’ despite a worse-than-expected May jobs report. The FOMC members also predicted ‘sustained expansion of economic activity.’ The Fed still maintained that the US central bank would act if necessary to help boost the US economy.
‘In light of these uncertainties and muted inflation pressures, the FOMC will closely monitor the implications of incoming information for the economic outlook and will act as appropriate to sustain the expansion,’ noted the FOMC members.
Could the Fed cut interest rates in the future?
Though the Fed decided against an interest rate cut, there are signals that there could be one in 2020. Fed chair, Jerome Powell, acknowledged that there was growing support for interest rate cuts in the future among FOMC members.
‘The case for somewhat more accommodative policy has strengthened,’ said Powell.
What do economists say about the Fed decision?
Steve Rick, chief economist at CUNA Mutual Group, said the Fed’s decision wasn’t surprising and could pacify investors as the central bank monitors economic volatility.
‘This was probably the compromise decision — it wasn’t shocking and should offer some reassurance. The FOMC will still want to closely monitor the stress fractures from the bond market, middling housing and auto sales numbers, and an increasingly uncertain global economic landscape in the coming months,’ said Rick.
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