(New: Fed Chair Powell’s comments in paragraphs 3 and 4)
WASHINGTON (dpa-AFX) – The US Federal Reserve is initially keeping its key interest rates stable, but at the same time is signaling further interest rate hikes this year. The key interest rate range will initially remain between 5.0 and 5.25 percent, as the Federal Reserve announced on Wednesday after its two-day monetary policy meeting in Washington. Analysts had largely expected this decision. At the same time, however, the monetary watchdogs apparently expect to raise their key interest rates further.
The interest rate projection for 2023 was raised from 5.1 to 5.6 percent after the monetary policy meeting. This means that Fed members expect, on average, two more rate hikes this year. Before the interest rate decision, quite a few experts had thought it possible that interest rates would not be increased at all this year. The interest rate projections for 2024 and 2025 were also raised.
US Federal Reserve Chairman Jerome Powell confirmed that there is a strong bias in the Fed for further rate hikes. Almost all members of the FOMC monetary policy committee currently believe that there will be additional rate hikes, Powell told the press after the rate meeting.
However, Powell also emphasized that the Fed does not commit itself and only makes its concrete decisions at the respective interest rate meeting. No decisions for the future were made at the current meeting – not even for the upcoming meeting in July.
In March 2022, the key interest rate was still just above the zero line. Since then, the Fed has been fighting high inflation with sharp interest rate hikes. Inflation has also fallen in recent months, but underlying core inflation has only slowed.
The Fed expects slightly higher economic growth this year. The gross domestic product (GDP) of the world’s largest economy is expected to grow by one percent. That would be 0.6 percentage points more than forecast in March. For the coming year, the Fed predicts growth of 1.1 percent.
Meanwhile, monetary watchdogs are expecting a slightly lower inflation rate. The inflation rate is expected to average 3.2 percent in 2023 – a decrease of 0.1 percentage point compared to the previous forecast in March. However, core inflation excluding food and energy prices is expected to be slightly higher this year at 3.9 percent (March forecast: 3.6 percent).
The Fed is committed to the goals of price stability and full employment and is aiming for an inflation rate of 2 percent./bgf/nau/jsl/men