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A trader at a Fed decision at the end of 2018
Photo: Brendan McDermid / REUTERS
The U.S. Federal Reserve keeps the key interest rate constant at the end of the year. The monetary watchdogs around Fed Chairman Jerome Powell decided to leave the key monetary policy rate in the range of 5.25 to 5.50 percent, the highest level in 20 years. The financial markets had expected another pause. After some aggressive upward interest rate hikes, it is now the third time in a row that the central bank has left interest rates unchanged.
At the same time, in their interest rate outlook for 2024, they signal that the key monetary policy rate is likely to fall by 0.75 percentage points over the course of the coming year. None of the monetary authorities sees higher interest rates at the end of next year than they do now.
For the financial markets, the updated interest rate outlook of the monetary authorities is particularly important. Fed Chair Powell recently stressed that it was still too early to speculate on when monetary policy might be eased. "I expect a first interest rate cut from the summer of next year," KfW Chief Economist Fritzi Köhler-Geib had predicted in the run-up to the meeting.
Inflationary pressures have eased further recently: the inflation rate fell slightly to 3.1 percent in November, after 3.2 percent in October. This means that the central bank's target of two percent inflation is gradually coming into view, which is seen as ideal for the economy.
The economy has proven to be robust despite tight monetary policy. It grew by an annualized 5.2 percent in the third quarter, the fastest pace in almost two years. The central bank wants to fight inflation with its tight monetary policy stance without choking off the economy.
kko/mgo/dpa/Reuters