WASHINGTON, D.C. – The Federal Reserve announced they’re not reducing their key interest rate but rather keeping it the same. Markets and other experts believed rates were going to be lowered after the Reserve has kept them up trying to fight inflation. But that could change come September.
“Today the FOMC (Federal Open Market Committee) decided to leave the policy interest rate unchanged and continue to reduce our securities holdings,” said Jerome Powell, the Chair of the Federal Reserve.
It was a surprising announcement from Powell announcing they’re keeping interest rates the same despite seeing positive readings in inflation and the job market.
“We are maintaining our restrictive stance of monetary policy in order to keep demand in line with supply and reduce inflationary pressures,” added Powell.
The Federal Reserve helps set interest rates, which determines how much it costs for consumers and businesses to borrow money for products and services. It impacts things like buying a car, getting a new home, loans and other services. Within the past couple of years inflation has been their biggest foe. The Reserve has kept the interest rates up at 5.33 percent, a two-decade high where they have remained for about a year in hopes of cooling inflation. Powell said they’ve seen some positive economic indicators but not enough to reduce the rate.
“My colleagues and I are acutely aware that inflation imposes significant hardship as it erodes purchasing power especially for those least able to meet the higher costs of essentials like food, housing and transportation,” said Powell. “Our monetary policies are guided by our dual mandate to promote maximum employment and stable prices for the American people. We had a quarter of poor inflation data at the beginning of the year and then we saw some more good inflation data and then seven months at the end of last year- you know we just want to see more and gain confidence.”
Powell hints there could be a cut coming, possibly as early as September.
“If we were to see inflation for example moving down quickly more or less in line with expectations, growth let’s say remains reasonably strong, and the labor market remains at its current condition then i think a rate cut could be on the table,” said Powell.