MADRID, 19 (EUROPA PRESS)
The Federal Open Market Committee (FOMC) of the Federal Reserve of the United States (Fed) has decided on Wednesday to keep interest rates in the target range of 4.25% to 4.50%.
This pause follows the one decreed last January and the three consecutive cuts initiated in September, when the price of money was cut for the first time since March 2020.
In its statement, the entity has emphasized that the uncertainty about economic prospects «has increased,» so the central bank’s governing body will continue to «monitor» the risks weighing on employment and inflation.
«Recent indicators suggest that economic activity has continued to grow at a solid pace. The unemployment rate has stabilized at a low level in recent months, and labor market conditions remain strong. Inflation remains somewhat elevated,» summarized the Fed.
The FOMC has indicated that, when adjusting the reference rate, it will be attentive to the impact of incoming data on the macroeconomic environment and the balance of risks.
In this regard, the issuing institute has stated that it will be «prepared» to adjust rates as necessary, analyzing readings on the labor market, inflation, as well as the effects of international and financial events.
The Fed has modified its balance reduction plans, as it will now decrease reinvestment of principal debt maturities of Treasury bonds from $25 billion (€22.951 billion) to $5 billion (€4.590 billion). However, mortgage-backed securities will remain at the current $35 billion (€32.131 billion).
The decision of the Federal Reserve has met with the dissent of one of its members, Christopher Waller, who was in favor of keeping interest rates unchanged but advocated for continuing with the previous pace of balance reduction.
ECONOMIC FORECASTS
Additionally, the Fed has also published the update of its macroeconomic forecasts, as well as the estimates of its members on the evolution of interest rates.
In December, FOMC members expected interest rates to be between 4% and 4.25% at the end of 2025. The ‘dot plot’ now shows that the majority of its members still favor this figure, while others lean towards higher levels.
The Fed’s central projection indicates that interest rates will be between 3.9% and 4.4% in 2025, compared to the December projection of 3.6% and 4.1%. For 2026, the forecast is between 3.1% and 3.9%, while the previous forecast had a range of 3.1% and 3.6%. In 2027, rates will be between 2.9% and 3.6%.
Regarding the macroeconomic outlook, the issuing institute has revised its projections downward. Thus, it has lowered by four tenths to 1.7% the country’s GDP growth in 2025. Subsequently, the forecasted growth for 2026 has been modified by two tenths to 1.8%, and for 2027 by one tenth to 1.8%.
As for unemployment, the Fed estimates that the country will have a 4.4% unemployment rate in 2025, one tenth more than estimated three months ago. For the following two years, it will remain stable at 4.3%.
On the other hand, inflation will be 2.7% by the end of the year, two tenths higher than in December, while the core variable, which excludes energy and food prices due to their higher volatility, will be at 2.8%, three tenths higher.
In 2026, the overall and core indices will be at 2.2%, one tenth higher and unchanged, respectively, while in 2027, both the overall and core indices will be at 2%.
GDP, UNEMPLOYMENT, AND INFLATION
The economy of the world’s leading power experienced an annualized growth of 2.3% in GDP in the fourth quarter of 2024, compared to 3.1% in the previous three months.
Regarding the US labor market, 151,000 non-farm jobs were created in February, above the 125,000 in January. Meanwhile, unemployment rose by a tenth to 4.1%.
The Personal Consumption Expenditures Price Index, the Fed’s preferred statistic for monitoring inflation, stood at 2.5% in January, a tenth lower. The monthly rate recorded a 0.3% increase, unchanged. The core variable closed at a 2.6% annual rate, three tenths lower.
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FUENTE
