Federal Reserve keeps key interest rate steady as inflation shows signs of further slowing.

The Federal Reserve announced on Wednesday that it would maintain its key interest rate, as it continues to address the elevated inflation rates impacting U.S. businesses and consumers.

In its statement, the central bank noted that economic activity "has continued to expand at a solid pace," with job gains remaining strong and the unemployment rate staying low.

Despite some easing over the past year, inflation remains high, and there has been "modest further progress toward the Committee’s 2% inflation objective."

The Fed now anticipates only one rate cut in 2024, down from multiple cuts projected earlier.

Signs of slowing price growth have appeared, prompting some analysts to speculate that a rate cut could occur before November's general election.

The Fed is responsible for controlling inflation by managing the federal funds rate, which influences overall borrowing costs in the economy.

For the past year, the Fed has kept the rate at around 5.5%.

By keeping interest rates high, the Fed aims to curb consumer demand for goods and services, thereby slowing price growth. When consumer purchasing is more difficult, businesses are less likely to raise prices.

This policy has led to APRs exceeding 20% on most major credit cards, according to Bankrate, with mortgage and auto loan rates starting at 7%.

These higher rates may be effective: The Bureau of Labor Statistics reported that 12-month inflation was 3.3% in May, down from 3.5% in April and lower than expected by analysts.

On a monthly basis, inflation did not increase at all, a first since July 2022.

Fed officials have expressed no immediate plans to change the current rate level, preferring to see continued progress on reducing price growth.

“Many more months of positive inflation data, I think, to give me confidence that it’s appropriate to dial back,” Neel Kashkari, president of the Federal Reserve Bank of Minneapolis, told CNBC last month when asked about the conditions needed for lowering interest rates.



Source: NBC News

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