The Fed keeps rates between 5.25% and 5.5% for the third consecutive meeting

MADRID, 13 (-)

The Federal Open Market Committee (FOMC) of the United States Federal Reserve (Fed) has decided to maintain interest rates in the target range of between 5.25% and 5.5%, at highest levels since January 2001, as reported by the central bank in a statement this Wednesday.

In this way, the institution has decided to maintain its monetary policy unchanged for the third consecutive meeting after the last increase of 25 basis points in the price of money carried out last July.

“The Committee will continue to evaluate additional information and its implications for monetary policy,” the central bank has indicated.

To determine the degree of potential tightening that may be appropriate to return inflation to 2%, the Fed “will take into account the cumulative tightening of monetary policy and the lag with which it affects economic activity and inflation, and the development of economic and financial events”.

In assessing the appropriate monetary policy stance, the Committee has assured that it will continue to monitor the implications of incoming data for the macroeconomic picture.

ECONOMIC FORECASTS

Likewise, the Fed has also published the update of its macroeconomic forecasts, as well as its members’ estimates on the evolution of interest rates.

The ‘dot-plot’, or dot plot, has undergone some modifications compared to September. In the ninth month of 2023, FOMC members expected rates to be between 5.5% and 5.75% at the end of 2023, with a trend towards the latter figure.

Now, however, everyone has agreed that the 5.25% and 5.5% range will remain given that there will be no more Fed meetings this year.

Looking ahead to 2024, there is a clear dispersion among those who expect the price of money to be between 4.5% and 5%, although some members are betting on even higher figures and only one on 4%.


The central projection of the issuing institute indicates that interest rates will be 5.4% in 2023, coinciding with the lower end of the September projection of 5.4%-5.6%. For 2024, the forecast is for the range to be between 4.4% and 4.9%, compared to the previous forecast of between 4.6% and 5.4%.

Regarding macroeconomic developments, the Fed has improved its outlook. Thus, it has revised upwards, to 2.6%, the country’s GDP growth in 2023 compared to the 2.1% estimated in September. However, the growth forecast for 2024 has been reduced by one tenth, to 1.4%, although that for 2025 remains unchanged at 1.8%.

Regarding unemployment, the Fed estimates that the country will close the year with an unemployment rate of 3.8%, the same as estimated three months ago. In both 2024 and 2025, unemployment will be 4.1%, also identical figures to those of the previous forecasts.

For its part, inflation will be 2.8% at the end of the year, five tenths less, while the underlying variable, which excludes energy and food prices from its calculation due to their greater volatility, will remain at 3.2%, half a point less. By 2024, the general and underlying index will be 2.4% in both cases.

GDP, UNEMPLOYMENT AND INFLATION

The economy of the world’s leading power experienced annualized growth of 5.2% of its GDP in the third quarter of 2023 compared to 2.1% in the previous section, according to the Bureau of Economic Analysis (BEA) .

As for the US labor market, it created 199,000 non-agricultural jobs during the month of November, which allowed unemployment to be reduced by two tenths, to 3.7%, according to the Bureau of Labor Statistics of the Department of Labor.

Thus, the unemployment rate in the US is once again approaching the minimum recorded in January and April, when it stood at 3.4%, which was its lowest rate since 1969.

For its part, the personal consumption expenditure price index, the variable preferred by the Fed to monitor inflation, stood at 3% year-on-year in October, four tenths below the previous month. The monthly rate registered stagnation, four tenths less than in September. The underlying variable closed at 3.5%, two tenths less.

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