The Federal Open Market Committee (FOMC) of the United States Federal Reserve (Fed) has decided to maintain interest rates in the target range of between 5.25% and 5.5%, at highest levels since January 2001, as reported by the central bank in a statement this Wednesday.
In this way, the institution has once again maintained its monetary policy unchanged for the fifth consecutive meeting after the last increase of 25 basis points in the price of money carried out last July and the pause that began in September.
“When considering any adjustment to the target range of the federal funds rate, the Committee will carefully evaluate the incoming data, the evolution of the outlook and the balance of risks,” said the central bank, which has described the macroeconomic picture as “uncertain.”
Likewise, the decision-making body has indicated that it “does not expect it to be appropriate to reduce the target range until it has gained greater assurance that inflation is steadily returning to 2%.”
In line with its last meeting, the phrase that referred to the “degree of potential tightening” has once again been omitted from the document, which indicates that the Committee considers discarded the possibility of new increases, although the line continues to appear which also ensures that inflation remains “high.”
Likewise, the Fed has also published the update of its macroeconomic forecasts, as well as its members’ estimates on the evolution of interest rates.
In the last month of 2023, FOMC members expected rates to be between 4.5% and 5% at the end of 2024, although some members were betting on even higher figures and only one for 4%.
The ‘dot-plot’, or dot diagram, now shows similar projections, although the member who bets on a lower figure is 4.25%, while the majority of members predict that the rates will end between 4. .5% and 5%. Four believe that rates will remain above 5% at the end of 2024.
The central projection of the issuing institute indicates that interest rates in 2024 will be between 4.6% and 5.1% compared to the December projection of 4.4% and 4.9%. For 2025, the forecast is for the range to be between 3.4% and 4.1%, when the previous forecast showed a range of 3.1% and 3.9%.
Regarding macroeconomic developments, the Fed has improved its outlook. Thus, it has revised upwards, to 2.1%, the country’s GDP growth in 2024 compared to the 1.4% estimated in December. Subsequently, the growth forecast for 2025 and 2026 has been increased by two and one tenth, respectively, to 2% in both years.
Regarding unemployment, the Fed estimates that the country will have an unemployment rate of 4% in 2024, one tenth less than estimated three months ago. By 2025 it will rise one tenth, to 4.1%, and will return to 4% the following year.
For its part, inflation will be 2.4% at the end of the year, unchanged, while the underlying variable, which excludes energy and food prices from its calculation due to their greater volatility, will remain at 2.4%. .6%, two tenths more. In 2025, the general and underlying index will coincide at 2.2%, while in 2026 they will also do so, but at 2%.
GDP, PARO AND INFLATION
The economy of the world’s leading power experienced annualized growth of 3.2% of its GDP in the fourth quarter of 2023 compared to 4.9% in the previous quarter, according to the Bureau of Economic Analysis (BEA). .
Regarding the US labor market, 275,000 non-agricultural jobs were created last February, despite which unemployment increased by two tenths, to 3.9%, according to the Bureau of Labor Statistics of the Department of Labor.
Thus, although the unemployment rate moved away from the minimum of 3.4% recorded in January and April 2023, its lowest rate since 1969, the US has already created jobs for 38 consecutive months.
For its part, the personal consumption expenditure price index, the variable preferred by the Fed to monitor inflation, stood at 2.4% in January, two tenths less than in the previous month. The monthly rate recorded a rebound of 0.3% from the previous reading of 0.1%. The underlying variable closed at 2.8% year-on-year, one tenth less.
