US Fed maintains high interest rates, slows balance sheet runoff, raises growth and inflation forecasts.

From Mint: 2024-06-22 23:22:30

The US Federal Reserve maintains interest rates at 5.25-5.50% for the sixth consecutive meeting, in line with market expectations. The central bank plans to keep rates high until inflation cools and moves towards the target range. US core inflation and GDP growth forecasts for 2024 have been slightly raised.

Fed Chair Jerome Powell indicates that the economic outlook is uncertain, with a focus on inflation risks. The Fed seeks to achieve maximum employment and two percent inflation in the longer run. The Fed’s aggressive monetary tightening cycle has helped lower annual inflation but made borrowing costlier for businesses and households.

The Federal Reserve announces it will not cut rates until inflation cools down, acknowledging that inflation remains elevated. The central bank will slow down the pace of balance-sheet runoff starting in June, reducing Treasury bonds runoff to $25 billion per month. This move aims to ensure the financial system has enough reserves.

Fed policymakers update economic forecasts, upgrading the US growth outlook for 2024 to 2.1% and slightly raising the core inflation forecast to 2.6%. Wall Street rallies on Powell’s remarks, with major indices up over one percent. Bond yields increase after Powell downplays the possibility of rate hikes and announces a balance sheet contraction.



Read more at Mint: US Fed to hold rates at 23-year high-mark until inflation cools, slows pace of balance sheet runoff: 5 key highlights