In December, the U.S. Federal Reserve announced its decision to keep interest rates unchanged amid the cooling of inflation. Echoing the decision of its meeting in October, the central bank’s Federal Open Market Committee stated that they will leave the federal funds rate – which serves as the benchmark for short-term borrowing costs – at a long-term low of 1.50%-1.75%.
The Department of Labor’s Consumer Price Index (CPI) reported a modest increase in core inflation in November, rising just 1.6% year-over-year. This marks a sharp decrease from the previous CPI rate recorded of 2%. Despite the low inflation rate, the Fed believes the US economy remains strong, with growth continuing at a steady rate.
This decision was supported by weaker-than-expected economic data from Germany, as well as improved U.S. retail sales in November. The weaker-than-expected data prompted market watchers to expect a rate cut in the United States. However, the Fed chose to take a measured approach and held off on making any drastic changes.
The decision was met with mixed reactions. On the positive side, the decision has restored investors’ confidence in the central bank’s commitment to monitor inflation for further economic stimulus. On the other hand, some have expressed concern that the Fed’s decision could weaken consumer spending power, thus preventing US economic rates from rising.
Despite the criticism, the Fed’s decision to keep rates steady is largely seen as a prudent and pragmatic response to the current economic climate. The Fed is expected to continue to monitor inflation to decide whether a rate change is warranted at a later stage. For now, the decision to keep interest rates steady appears to be closely linked to keeping inflation in check.
In December, the U.S. Federal Reserve announced its decision to keep interest rates unchanged amid the cooling of inflation. Echoing the decision of its meeting in October, the central bank’s Federal Open Market Committee stated that they will leave the federal funds rate – which serves as the benchmark for short-term borrowing costs – at a long-term low of 1.50%-1.75%.
The Department of Labor’s Consumer Price Index (CPI) reported a modest increase in core inflation in November, rising just 1.6% year-over-year. This marks a sharp decrease from the previous CPI rate recorded of 2%. Despite the low inflation rate, the Fed believes the US economy remains strong, with growth continuing at a steady rate.
This decision was supported by weaker-than-expected economic data from Germany, as well as improved U.S. retail sales in November. The weaker-than-expected data prompted market watchers to expect a rate cut in the United States. However, the Fed chose to take a measured approach and held off on making any drastic changes.
The decision was met with mixed reactions. On the positive side, the decision has restored investors’ confidence in the central bank’s commitment to monitor inflation for further economic stimulus. On the other hand, some have expressed concern that the Fed’s decision could weaken consumer spending power, thus preventing US economic rates from rising.
Despite the criticism, the Fed’s decision to keep rates steady is largely seen as a prudent and pragmatic response to the current economic climate. The Fed is expected to continue to monitor inflation to decide whether a rate change is warranted at a later stage. For now, the decision to keep interest rates steady appears to be closely linked to keeping inflation in check.
