Federal Reserve Holds Rates Steady Amid Inflation Concerns; Outlook Remains ‘Uncertain’

On Wednesday, May 1, 2024, the U.S. Federal Reserve chose to maintain the benchmark interest rates at their highest in 23 years. The Federal Open Market Committee (FOMC) members noted that although inflation has subsided, it still “remains elevated.”

No Change in Federal Funds Rate; Fed Continues Watchful Eye on Inflation Risks

On Wednesday, the U.S. central bank announced that the federal funds rate will be unchanged, according to FOMC members in a press release. The bank described the economic outlook as “uncertain” and emphasized their vigilant monitoring of inflation risks. “In support of its goals, the committee decided to maintain the target range for the federal funds rate at 5-1/4 to 5-1/2 percent,” stated the FOMC.

The FOMC’s decision to maintain the current federal funds rate, unchanged since July 2023, was anticipated. The committee emphasized that it does not foresee a reduction in the target range as appropriate until there is more substantial evidence that inflation is steadily approaching 2%. The equities markets appeared relatively unaffected by this announcement, while bitcoin (BTC) increased by 2% within the last hour following the FOMC’s decision. Gold prices climbed by 0.83%, and the value of one ounce of silver increased by 1.08%.

Besides keeping the benchmark rate steady, the FOMC announced that starting in June, it will decelerate the rate at which it lets maturing bond proceeds expire without reinvestment. This effectively slows the reduction of the Fed’s balance sheet. “Beginning in June, the committee will slow the pace of decline of its securities holdings by reducing the monthly redemption cap on Treasury securities from $60 billion to $25 billion,” the Fed remarked. According to CME’s Fedwatch Tool, there is a 90% likelihood that the rate will remain unchanged after the upcoming FOMC meeting scheduled for June 12, 2024.

What do you think about the latest FOMC decision? Share your thoughts and opinions about this subject in the comments section below. #Write2Earn