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Fed left rates on hold amid disappointing inflation readings

Fed left rates on hold amid disappointing inflation readings

The US central bank will continue with interest rates in the current range of 5.25%-5.50%.

Photo: Reuters

The United States Federal Reserve (Fed) decided to continue with his current restrictive monetary policy and maintain interest rates at the current range of 5.25%-5.50%due to the recent and” disappointing” readings of inflation in the North American country.

This Wednesday, the US central bank confirmed that it will maintain the level of rates due to the data showing domestic inflation, despite the fact that it continues to lean towards an eventual reduction in borrowing costs.

In that sense, the idea of ​​a possible stagnation in the movement towards greater balance in the economy of the North American country crept in. In its latest monetary policy statement, issued at the end of this meeting, the Fed indicated that it keeps intact the “key” elements of its economic assessment, as well as its “guidance.”

Likewise, he points out that “inflation has decreased” over the last year, but that the Federal Open Market Committee The FOMC does not consider it “appropriate” to reduce the target range until it gains greater confidence that inflation is sustainably moving towards 2%.

“In recent months, there has been a lack of further progress towards the Committee’s 2% inflation target,” adds the Fed in today’s statement, when in the previous one it had suggested an improvement in dynamics stating that economic risks they were moving “towards a better balance.”

He Fed Chairman Jerome Powellbelieves that the current tightening of monetary policy is still holding back the US economy and that “the evidence shows very clearly that monetary policy is restrictive and weighs on demand.”

Market expectations at an international and local level

The international market is betting that the Fed will implement at least one rate cut this year, and point to the month of November as the most likely time for the first rate cut, while some traders believe there will be no cut at all.

At the local level, the market understands that the high level of Fed rates is the main factor influencing the exchange rate at the local level, and no cuts are expected at least until September.

Source: Ambito

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