US Federal Reserve holds rates steady despite inflation concerns

The US Federal Reserve has confirmed that it will keep the target range for the federal funds rate steady at 5 to 5-1/4 per cent, despite inflation levels remaining elevated. This move, according to the central bank, aims to gauge additional information and its implications for monetary policy.

The decision comes amidst signs of modest economic expansion and robust job gains over recent months, with unemployment rates remaining low. However, with household and business credit conditions tightening, the impact on economic activity, hiring, and inflation is uncertain.

The Federal Open Market Committee (FOMC) reaffirmed its commitment to its dual mandate of maximising employment and achieving an inflation rate of two per cent over the long term. It expressed readiness to adjust the policy stance as appropriate, should risks emerge that could impede these goals.

In addition, the Committee will persist in reducing its holdings of Treasury securities and agency debt and agency mortgage-backed securities, following its previously announced plans. This action reflects its strong dedication to returning inflation to the two per cent target.

As part of its policy stance assessment, the Committee will continue to monitor incoming data for economic outlook implications, with a focus on labour market conditions, inflation pressures, inflation expectations, and financial and international developments.

The Federal Reserve emphasised that the US banking system remains sound and resilient, a vital factor in navigating the country’s economic course. The extent of future policy adjustments will be shaped by multiple considerations, including the cumulative tightening of monetary policy, the delay with which monetary policy influences the economy, and other economic and financial developments.

ALCHEMPro News Desk (RKS)