The US central bank has decided to keep the interest rate unchanged once again, remaining at the level of 5.5%, which is the highest it has been in 23 years. Contrary to previous forecasts, the central bank now estimates that there will only be one interest rate cut in 2024, disappointing markets that had expected three cuts this year. This news caused a slight moderation in the sharp increases seen on Wall Street.
Investors are now eagerly awaiting a speech from the Chairman of the Fed, Jerome Powell, for more information on future interest rate plans. Today, the Consumer Price Index (CPI) data for May provided some positive news, showing signs of inflation stabilization. The overall index remained unchanged in May, with the core index rising slightly. These data suggest a moderation in the rate of inflation.
Despite these positive indicators, the consensus was that the Fed would maintain interest rates at 5.25%-5.5%. Investors are now focused on the Fed’s updated forecasts for growth, unemployment, and inflation in the US, as well as Powell’s comments following the interest rate announcement. At the beginning of the year, the Fed had predicted four interest rate cuts, but the current rate remains at a 23-year high.
The unexpected inflation data released today may bring the Fed closer to announcing an interest rate cut. After the data was released, markets began speculating about a possible cut in September, with another potential cut in December. Investors are now eagerly looking for signs to understand when this long-awaited interest rate cut may finally happen.