The cost of money remains at a 23-year high. It is the fifth time in a row that rates have not been adjusted. The US Central Bank, in a statement, reiterated that greater confidence in a trajectory of stable decline in inflation is needed before cutting interest rates. Powell: “We will continue to decide meeting by meeting”
The Fed has chosen to leave interest rates unchanged: the cost of money remains stuck in a range between 5.25% and 5.50%, at a 23-year high. The decision came after two days of meetings. The US Central Bank, in a statement, reiterated that greater confidence in a trajectory of stable decline in inflation is needed before cutting interest rates. It is the fifth time in a row that rates have not been adjusted. In 2024, as emerges from the tables attached to the monetary policy decision, three cuts in the cost of money are expected, for a total of 765 basis points.
US GDP
Furthermore, the Fed forecasts that US GDP will grow by 2.1% this year and 2% in 2025 and 2026. The unemployment rate, however, is estimated at 4% this year and 4%, 1% in 2025 (4% in 2026). Inflation in 2024, continues the Federal Reserve Bank, will stand at 2.4%, before falling to 2.2% in 2025 and 2% in 2026. The core inflation rate will be 2.6% this year. year, then decreasing in 2025 and 2026.
see also
The economy grows in Russia, GDP revised upwards by 3%
Powell: “We will continue to decide meeting by meeting”
It is appropriate to start cutting rates at “some point this year,” Fed Chair Jerome Powell confirmed, calling inflation still too high. “We will continue to decide on a meeting-by-meeting basis,” he added. And again, reiterating the Fed’s commitment to bringing inflation back to 2%, Powell explained: “We believe that our policy” on rates is “probably at the peak of this tight cycle. If we cut too early we could see inflation rear its head, if we cut too late we could damage the economy. There are risks on both sides.”
see also
Inflation, prices cool but the bill remains high
The Fed’s decision
“Recent indicators suggest that economic activity is expanding at a solid rate. Inflation has slowed over the past year but remains high,” reads the Fed’s final statement. The note specifies that the economic outlook ” is uncertain and the Fed will continue to watch for inflation risks.” “The Fed does not believe it is appropriate to reduce rates until it has greater confidence that inflation will move substantially towards 2%,” the statement adds, highlighting that the US central bank will continue to monitor the implications that come from the economic data and is ready to adjust course if risks emerge that could prevent the achievement of the double objective of maximum employment and price stability.
see also
Japan’s central bank raises interest rates
Economy
ECB, interest rates unchanged: what happens to mortgage repayments
In light of the ECB’s announcement and looking at Euribor futures, i.e. market expectations, it is clear that the next few months will be positive as regards variable mortgage installments, even if the much-announced decline will be a little slower than the expected. The savings will be, at least initially, between 14 and 22 euros per month
INTEREST RATES UNCHANGED
- The ECB has decided to leave interest rates unchanged. The rate on main refinancing remains unchanged at 4.50%, that on deposits at 4%, and that on marginal loans at 4.75%. This is the fourth pause in the cycle of ten consecutive increases that began in July 2022, while the desired rate cut has been postponed to the next few months
INFLATION ESTIMATE CUT
- The ECB also cut its inflation estimate for the euro area compared to its December forecasts. According to the new estimates, inflation will reach 2.3% in 2024 (from 2.7% previously), 2% in 2025 (from 2.1%) and 1.9% in 2026
OPINIONS ON INFLATION
- Speaking of inflation, in the Corriere della Sera Moneyfarm – an online consultancy company and one of the largest digital asset management companies – underlines how 2024 began with higher than expected inflation, although decreasing , and wait-and-see statements from central banks that have contributed to dampening the prospects of an imminent rate cut