US Fed holds interest rates steady amid economic uncertainty

The latest decision comes as unemployment remains low and labour market conditions remain robust. However, inflation levels continue to be somewhat elevated, prompting the Fed to remain cautious in its approach.

The Federal Open Market Committee (FOMC) reaffirmed its commitment to maximum employment and long-term inflation stability at 2 per cent, stating that risks to both sides of its dual mandate have increased.

As part of its policy stance, the Fed announced a slower pace of balance sheet reduction, particularly in Treasury securities. Starting in April, the monthly redemption cap on Treasury securities will be reduced from $25 billion to $5 billion, while the cap on agency debt and mortgage-backed securities will remain at $35 billion, the FOMC said in a statement.

The Committee will continue monitoring incoming economic data to determine the timing and extent of any future rate adjustments. Factors under consideration include labour market trends, inflation expectations, and global financial developments.

The vote on the latest policy action was not unanimous. While most FOMC members, including chair Jerome Powell and vice chair John Williams, supported the decision, Christopher J Waller dissented, advocating for the current pace of balance sheet reduction to continue.

With economic uncertainty rising, the Fed remains open to adjusting its stance as needed to ensure economic stability. Policymakers reaffirmed their strong commitment to bringing inflation back to the 2 per cent target while maintaining healthy employment levels, the statement added.

As financial markets react to the latest decision, investors and analysts will be closely watching upcoming economic data for further clues on the Fed’s future course of action.

ALCHEMPro News Desk (KD)