Washington: The US Federal Reserve in its January meeting voted to leave the key interest rate unchanged at 5.25-5.50 per cent, keeping the policy rate unchanged for the fourth straight time on a trot.
The US monetary policy committee in its statement said that the recent indicators suggested that economic activity has been expanding at a solid pace.
Job gains have moderated since early last year but remained strong, and the unemployment rate remained low. Inflation has eased over the past year but remains elevated.
“The Committee seeks to achieve maximum employment and inflation at the rate of 2 percent over the longer run. The Committee judges that the risks to achieving its employment and inflation goals are moving into better balance. The economic outlook is uncertain, and the Committee remains highly attentive to inflation risks,” the policy statement read.
In considering any adjustments to the target range for the key interest rate, the Committee will carefully assess incoming data, the evolving outlook, and the balance of risks.
“The Committee does not expect it will be appropriate to reduce the target range until it has gained greater confidence that inflation is moving sustainably toward 2 per cent,” it added.
US Fed had raised interest rates from near zero to now 5.25-5.50 per cent in the fight against inflation. Raising interest rates is a monetary policy instrument that typically helps suppress demand in the economy, thereby helping the inflation rate decline.
US inflation in December was 3.4 per cent.
US Federal Reserve’s commitment has been to bring down consumer inflation to its target of 2 per cent.
“I want to assure the American people that we are fully committed to returning inflation to our 2 percent goal. Restoring price stability is essential to achieve a sustained period of strong labor market conditions that benefit all,” US Fed Chair Jerome Powell said at a press after the monetary policy meeting.
For 2023 as a whole, the US’ GDP expanded at 3.1 percent, bolstered by strong consumer demand as well as improving supply conditions.
On possible loosening of monetary policy stance, Powell said he believes that its policy rate is likely at its peak for this tightening cycle and that, if the economy evolves broadly as expected, it will likely be appropriate to begin “dialing back” policy restraint at some point in 2024.
“We know that reducing policy restraint too soon or too much could result in a reversal of the progress we have seen on inflation and ultimately require even tighter policy to get inflation back to 2 percent,” Powell added.