The Federal Reserve leaves the interest rate in the US at 5.5%: “No further progress”

The Federal Reserve announced this evening (Wednesday) that the interest rate in the US will remain at its level, between 5.25% and 5.5%. This is the highest level in 23 years. The central bank set the rate in the summer of 2023 and has maintained it ever since.

The committee, consisting of Federal Reserve Chairman Jerome Powell, and central bank branch managers throughout the US, wrote in its announcement that the unemployment rate remains low, and that although inflation has been curbed, it is still higher than the central bank’s target. Therefore, in the “absence of further progress”, the committee decided to keep the high interest rate. Along with the interest rate decision, the central bank announced the continued reduction of its assets, meaning the absorption of liquidity from the banking system.

The decision is not surprising, given slight increases in the annual inflation rate in recent months, alongside the unemployment rate remaining at a relatively low level. In January the inflation rate was 3.1%, in February it rose to 3.2%, and in March to 3.5%. The unemployment rate also increased by a percentage point between January and March, but it remained at a relatively low level. Between November and January, unemployment stabilized at a rate of 3.7%; In February the rate rose to 3.9% and in March it fell back to 3.8%.

However, the fact that the inflation rate is still low compared to the peaks of 2021 and 2021, alongside the slight increase that was nonetheless in the unemployment rate, explains why the committee did not raise the interest rate to an even higher rate.

The committee’s announcement from the evening, together with the recent inflation increases, have put an end to the expectations of an interest rate cut in the near future. Without a significant decrease in inflation rates, or a significant increase in unemployment, the high interest rate is expected to continue for a long time.