US policy rates are at 23-year highs, which is why the Fed is not cutting

Federal Reserve

The US inflation rate is on the decline, but the country’s central bank, the Federal Reserve, has kept policy interest rates unchanged for another month.

 

According to the report of the Guardian, the first meeting of the Federal Reserve’s monetary policy committee this year, on Wednesday, decided to keep the policy interest rate unchanged, that is, at the highest level in the last 23 years. Markets had expected that the Fed would start raising interest rates from March this year. But after yesterday’s meeting, Fed Chairman Jerome Powell strongly opposed that idea.

 

However, the Fed did not say that it will not cut policy rates this year. Instead, they said they were very close to cutting policy rates for the first time since 2020. In a statement, the Fed said it is moving toward a more balanced environment than before with its inflation and employment targets.

 

In a press conference, Jerome Powell said that almost all policymakers believe that interest rate cuts by the end of this year will be appropriate.

 

After the start of the Russia-Ukraine war in 2022, the rate of inflation in the United States, like many countries around the world, increased sharply. Since then, the Federal Reserve has started aggressively raising policy interest rates. Apart from the Fed, other central banks around the world follow this policy.

 

At one point, the rate of inflation began to decline, but the Federal Reserve kept interest rates at a high level from July 2023. Since then, the Fed’s interest rate has ranged from 5.25 percent to 5.5 percent. The meeting of the Monetary Policy Committee which ended yesterday said that until inflation is within the target of 2 percent or the rate of inflation will be within 2 percent – until this conviction is created in the mind of the central bank, it will not be appropriate to cut the interest rate.

 

The Federal Reserve is essentially trying to take a balanced stance. Jerome Powell believes that if the policy interest rate is cut before the situation improves, the rate of inflation will increase. He also said that if the decision is not taken at the right time or if the interest rate is not reduced as much as necessary, the economy will be in danger of collapsing.

 

However, the rate of inflation in the United States has come down a lot. In June 2022, the country’s price index, which exceeded 9 percent, fell to 3.4 percent last December. But many of the country’s citizens still struggle with the high cost of living.

 

The US inflation rate is on the decline, but the country’s central bank, the Federal Reserve, has kept policy interest rates unchanged for another month.

 

According to the report of the Guardian, the first meeting of the Federal Reserve’s monetary policy committee this year, on Wednesday, decided to keep the policy interest rate unchanged, that is, at the highest level in the last 23 years. Markets had expected that the Fed would start raising interest rates from March this year. But after yesterday’s meeting, Fed Chairman Jerome Powell strongly opposed that idea.

 

However, the Fed did not say that it will not cut policy rates this year. Instead, they said they were very close to cutting policy rates for the first time since 2020. In a statement, the Fed said it is moving toward a more balanced environment than before with its inflation and employment targets.

 

 

 

In a press conference, Jerome Powell said that almost all policymakers believe that interest rate cuts by the end of this year will be appropriate.

 

After the start of the Russia-Ukraine war in 2022, the rate of inflation in the United States, like many countries around the world, increased sharply. Since then, the Federal Reserve has started aggressively raising policy interest rates. Apart from the Fed, other central banks around the world follow this policy.

 

At one point, the rate of inflation began to decline, but the Federal Reserve kept interest rates at a high level from July 2023. Since then, the Fed’s interest rate has ranged from 5.25 percent to 5.5 percent. The meeting of the Monetary Policy Committee which ended yesterday said that until inflation is within the target of 2 percent or the rate of inflation will be within 2 percent – until this conviction is created in the mind of the central bank, it will not be appropriate to cut the interest rate.

 

 

 

The Federal Reserve is essentially trying to take a balanced stance. Jerome Powell believes that if the policy interest rate is cut before the situation improves, the rate of inflation will increase. He also said that if the decision is not taken at the right time or if the interest rate is not reduced as much as necessary, the economy will be in danger of collapsing.

 

However, the rate of inflation in the United States has come down a lot. In June 2022, the country’s price index, which exceeded 9 percent, fell to 3.4 percent last December. But many of the country’s citizens still struggle with the high cost of living.

 

 

Federal Reserve officials are now awaiting the release of the nation’s employment figures for January. These figures are expected to be published on Friday. A total of 2.7 million new jobs were created in the United States in 2023. As a result, the negative situation that was supposed to be created in the economy due to the Fed’s aggressive policy of increasing interest rates, did not happen.

 

Meanwhile, after the announcement of the Federal Reserve’s monetary policy yesterday, various indices of the US stock market fell. The S&P 500 index fell 0.8 percent and the Nasdaq Composite, an index of technology companies, fell 1.1 percent.

 

The next meeting of the Fed’s monetary policy committee will be in March. In that meeting, it is known that there is no possibility of reducing the policy interest rate

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