The Federal Reserve has not changed interest rates again in the US

The interest rate was last hiked since July last year. By doing so, the central bank tried to reduce inflation. Consumer prices in the world’s largest economy are now rising stronger than they were a year ago.

Earlier on Wednesday, US consumer prices rose 3.3 percent in May. This means inflation was lower than expected and lower than a month ago. A better-than-expected inflation number has investors hoping the Federal Reserve will cut interest rates later this year.

‘Sensitive Progress’

Central bank policymakers unanimously agreed to maintain the central bank’s current rate. They now expect one rate cut this year and four rate cuts next year. This is more than the three previously considered. “There has been modest progress towards the 2 percent inflation target in recent months,” the central bank said, adding that the economic outlook remains uncertain.

Federal Reserve Chairman Jerome Powell said after a two-day interest rate meeting that inflation in the U.S. has eased but remains high. According to him, the central bank is ready to keep interest rates high “as long as necessary”. Powell said Wednesday’s inflation data was “a step in the right direction” but “more good inflation readings” are needed before considering a rate cut.

European interest

The ECB decided to cut interest rates last week, for the first time since 2019. The central bank decided to do this because inflation in the euro area has weakened significantly. ECB President Christine Lagarde, however, was cautious in explaining the reduction. “There is still a long way to go before inflation is squeezed out of the economy,” he said.