The US Central Bank temporarily stops raising interest rates against inflation | News

The Fed’s decision to pause is not unexpected. A large majority of economists had already expected the Fed to leave interest rates unchanged. In the previous decision in May, the US interest rate was raised by a quarter of a percentage point to a range of 5.00 to 5.25 percent. This is the highest level in sixteen years.

By making borrowing more expensive, the Fed is curbing demand in the economy and this should prevent prices from rising quickly. The danger is that the economy may end up in a recession due to lower demand. The Fed started raising interest rates in March last year.

Fed Chairman Jerome Powell indicated in May that aggressive intervention is less necessary. This is because the US financial sector is already suffering from the so-called monetary tightening as a result of the recent turmoil in the banking sector. As a result, banks have become more cautious in granting new loans, so that borrowing costs do not have to increase as much as reduce demand.

On Tuesday, it was announced that inflation in the world’s largest economy fell to 4 percent in May. However, core inflation, which does not take into account the volatility of energy and food prices, remained stubbornly high at 5.3 percent.

The decision to leave interest rates unchanged was made unanimously by policymakers, according to a statement from the Federal Reserve. The Fed also states that the banking sector is happy and recent job growth has been strong. Inflation remains at a high level. The central bank now wants to take a moment to review all the information to determine its impact on policy.

Powell said in a statement that there was still “a long way to go” to bring inflation down to the 2 percent target. The Fed will decide interest rates at each meeting, depending on the information. Powell said the decision to leave interest rates unchanged now was “wise”.