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The US Federal Reserve left interest rates unchanged, but said the cost of money could rise by as much as half a percentage point before the end of 2023, due to a slower decline in headline inflation.
The US Federal Reserve paused raising interest rates, but warned that further increases may be necessary by the end of the year. For now, the cost of money has remained in the range of between 5% and 5.25%, the highest level since mid-2007, after a streak of ten consecutive increases by the Fed.
Fed Chairman Jerome Powell said that US growth and the job market are better than expected after the tightening of monetary policy, which will lengthen the Fed’s battle against inflation, which is also fighting not to cause an economic recession.
For some experts the pause was prudent. “We believe that today’s pause has been prudent. Although core inflation remains uncomfortably above target (core CPI at 4.7%), there have been marginal improvements in recent months. In fact, the slowdown in the ‘services without housing rentals’ category in the May CPI published yesterday showed more encouraging signs that inflation could moderate considerably in the future,” XP Investments said in a note.
According to the Fed’s latest quarterly projections, “growth estimates were up a bit, unemployment estimates down a bit, and inflation estimates up.”
“The conditions we need to reduce inflation are in place,” Powell told reporters, citing below-trend growth, a somewhat weak labor market and improving supply chains. “But the process of getting that to really work on inflation is going to take some time,” she added.
The Fed published its economic forecasts and they project that inflation will continue to moderate this year to 3.2%, and 2.5% in 2024. For GDP, they expect an increase of 1.1% compared to 1.2 % that you estimated before. By 2025 they believe that the economy will grow 1.8%, one tenth higher than their previous forecast.
with EFE
