As expected, the Federal Reserve has decided to leave rates unchanged at 0,25-0,5% for the sixth time in a row. This was announced at the end of its meeting, which began yesterday, by the Federal Open Market Committee, i.e. the monetary policy arm of the American central bank.
“The conditions for a rate hike have strengthened”, however admitted Janet Yellen who at the moment has decided “to wait for further evidence of continued progress towards her objectives” of full employment and price stability. “Monetary policy remains accommodative, therefore in support of a further improvement in labor market conditions and the return [of annual growth] of inflation to 2%”, added the number one of the Fed. In all probability the operation is only postponed, as many now they believe after the US elections in November: then a change in monetary policy will be absolutely in the air.
The last time the cost of borrowing was changed was in December 2015. At that time, the Fed announced the first monetary tightening since June 2006 thus starting the normalization of its accommodative monetary policy. The rise in interest rates – hitherto stuck at the all-time low to which they were brought in December 2008 in the wake of the worst financial crisis since the 30s – was 25 basis points.
The Federal Reserve has also revised its estimates of the trend for the current year of the main indicators of the star-striped economy. The US central institute has GDP growth estimates revised downwards from 2% last June to 1,8%. However, the forecasts for 2017 at 2% and for 2018 at 1,8% were left unchanged. As regards inflation, that of 2016 was brought to 1,3% from 1,4%.
The consumer price index estimates for 2017 at 1,9% and for 2018 at 2% were left unchanged. In the end, regarding the unemployment rate, in the United States at the end of 2016 will stand at 4,8%. The Fed has raised this forecast from last June, when it was of a rate of 4,7% for the end of the year. The estimate for 2017 remained unchanged at 4,6%, while lowering that for 2018 to 4,5%, expecting a rate of 4,6% for 2019.
