The Federal Reserve (Fed) announced its latest interest rate decision, maintaining the federal funds rate target range at 5.00-5.25%. Despite the stable rates, the dot plot suggests a more hawkish signal, indicating the possibility of two rate hikes in the future.
Key points from the FOMC statement:
- Interest rates remain unchanged, in line with market expectations.
- Committee members unanimously agreed on this rate decision to assess further economic data.
- Strong job growth and a low unemployment rate were noted.
- High attention is given to inflation risks, with a resilient and robust banking system.
- The pace of reducing holdings in the U.S. Treasury and mortgage-backed securities (MBS) will remain unchanged.
Key points from Powell’s remarks:
- Most policymakers believe that further rate hikes are appropriate, but the pace should be moderate.
- Rate cuts are not considered this year, but they would be appropriate if inflation significantly declines.
- The labor market’s resilience serves as the engine of the U.S. economy.
- Past inflation predictions have been inaccurate, and there has been no significant progress in core PCE over the past six months.
- The U.S. economy may experience a soft landing, and a gradually cooling strong labor market could contribute to achieving this goal.
Conclusion:
• The Fed maintains unchanged interest rates, but the hawkish dot plot signals the possibility of two future rate hikes.
• The job market’s resilience and inflation risks will be important factors in future policy decisions.
• The U.S. economy may experience a soft landing, necessitating close monitoring of developments in the labor market.
