Washington (EFE).- The Federal Reserve (Fed) decided this Wednesday to take a break and will not raise interest rates this month, although it did not rule out continuing to raise them in the future if necessary.
Rates thus remain in a range of between 5% and 5.25%, the highest level since mid-2007, after a streak of 10 consecutive increases carried out to lower inflation.
“Keeping the target range stable at this meeting allows the (Federal Open Market) Committee to evaluate additional information and its implications for monetary policy,” the Fed said in a statement in which it warned that despite the pause it is prepared for more rises “if risks arise” that prevent inflation from falling to the 2% target.
In determining the degree of additional policy tightening that may be appropriate to achieve that objective, the Committee will take into account the cumulative tightening of monetary policy, the way in which monetary policy affects economic activity and inflation, and factors economic and financial.
The drop in inflation, a determinant for interest rates
The president of the Fed, Jerome Powell, appears this afternoon to explain this decision, which is known one day after learning that the year-on-year rate of inflation fell considerably in May, 9 tenths, to stand at 4%, its lowest level since March 2021.
It was the second steepest drop in the consumer price index since it started to decline 11 months ago, though the figure is still far from the Fed’s 2% target.
In the statement, the Federal Reserve points out that recent indicators “suggest that economic activity continues to expand at a moderate pace”, in a scenario in which job creation has been solid in recent months and the unemployment rate has it has remained low, but inflation “remains high”.
The Fed acknowledged that tighter credit conditions for households and businesses are likely to weigh on economic activity, hiring and inflation although “the extent of these effects remains uncertain.”
The US banking system, he added, “is solid and resilient.”