Federal Reserve opts to keep interest rates unchanged

During its initial meeting of the year, the Federal Reserve opted to keep interest rates unchanged. The likelihood of a rate cut in March diminished following statements by Jerome Powell, who expressed the US central bank’s discomfort with the current inflation trajectory.

Goldman Sachs adjusted its forecast, predicting the Federal Reserve to commence interest rate cuts in May instead of March, with an expectation of five rate reductions in the year. Bill Adams, chief economist at Comerica Bank, suggested that the Federal Reserve will wait until inflation reaches the 2 percent target before considering rate cuts, anticipating a start in June.

The Federal Reserve fixed interest rates unchanged at its first meeting of the year, and it has become unlikely that the rate will be cut in March when bank officials hold their next meeting, especially after Jerome Powell’s statements.

Powell stated, after the end of the January meeting, that the central bank is likely not sufficiently comfortable with the path of inflation by its next meeting in March to resort to cutting rates. But Powell did not specify how many months it would take for the central bank to have more confidence in monetary easing.

Goldman Sachs revised its forecast for the Federal Reserve to start cutting interest rates to May instead of March, anticipating a move towards reducing rates five times this year. Bill Adams, chief economist at Comerica Bank, said that the Federal Reserve suffered severe damage in late 2021 and 2022 when it believed that high inflation would be temporary, and that its officials want to avoid the same mistake now. Adams added that the Federal Reserve will wait until it sees inflation at the 2 percent target to start cutting rates, expecting to start cutting in June.

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