The Federal Reserve (the US Central Bank) decided on Wednesday evening to maintain the main interest rates in the United States unchanged, noting that it is still expected to reduce interest twice during the current year, although many members of the Open Market Committee concerned with monetary policy management expect a lower benefit for the benefit.
The council also said that it expects to slow the pace of the growth of the American economy during the current and next two years compared to its expectations three months ago, according to a group of the quarterly economic expectations that were published on the federal site.
The bank also expects the unemployment rate to rise to 4.4 percent, and members of the Monetary Policy Committee expect inflation by a small rate by the end of this year to 2.7 percent compared to its current level of 2.5 percent, while the target level of the council is only 2 percent.
These expectations highlight the critical situation in which the Federal Reserve may find itself this year: the high inflation usually causes the council to keep the main interest rate high, or even raise it. On the other hand, the slowdown in economic growth and high unemployment often push the council to reduce interest rates to stimulate more borrowing and spending, and thus revitalize the economy.
For the second consecutive meeting, the Council kept the main interest rate in the range of 4.25-4.50 percent, while it is waiting to assess the impact of US President Donald Trump’s administration policies on the economy.
Experts expect that the customs duties that the administration decided to impose on American imports will lead to the high rate of inflation at least temporarily, but other policies such as canceling or alleviating many restrictions on various economic activities can reduce costs and thus calm inflation.
At the press conference, Jerome Powell, head of the Federal Reserve, said that there are indications that the customs duties imposed so far may have raised the cost of imported goods. Inflation was going back towards the level targeting the council, which is 2 percent, but it may take longer now with customs duties.
“I think that progress (towards the target level) may be late with the arrival of inflation caused by fees,” he added.
He said that the current economic scene is witnessing an “extraordinary increase in a state of blurring,” noting that “the current position of the bank’s policies in a good position to deal with the risks and fog we face.”
He added that the correct position of the council at the present time is “waiting for more clarity.”
The interest rate expectations were compatible with financial market estimates before the meeting and with the general estimates of the Federal Reserve that the gradual slowdown of inflation will allow more cash facilitation.
The interest rate estimates remained after the current year, as it is expected to reach 3.1 percent by the end of 2027.
The federal reserve has reduced interest rates in full percentage last year, but it has kept it so far this year pending more references to the continued decline in inflation and more clarity on the impact of Trump’s policies.
At the same time, the Reserve Council announced its intention to slow down the pace of reduction in the treasury bonds, which have grown dramatically during and after the shore of the Corona virus.
Previously, a recovery of $ 25 billion was allowed to value the treasury bonds monthly without re -investing revenues. Now, it will be allowed to recover only $ 5 billion per month. This means that the council will invest more value of the bonds due to pay in new securities, which limits the high rates of return on long -term treasury bonds.
