Fed holds rates steady at 23-year high, Inflation still a concern

In the two-day Federal Open Market Committee (FOMC) meeting, the Fed opted to maintain benchmark interest rates steady at 5.25 per cent – 5.50 per cent, aligning with expectations on Wall Street. This decision marks the sixth consecutive meeting without a change in rates, reinforcing the 23-year high mark.

During its third policy-setting gathering of the year on May 1, the rate-setting panel unanimously voted to keep the policy rate unchanged, citing a lack of progress towards the Committee’s two per cent inflation objective. The Fed emphasized that it doesn’t anticipate reducing the target range until there’s greater confidence in sustainable inflation movement towards the two per cent mark.

Following a series of rate hikes since March 2022, the Fed has maintained the policy rate since July 2023 to manage persistent inflation. Key points from the Powell-led FOMC decision include:

1. Benchmark interest rates remain at 5.25-5.50 per cent, staying at a 23-year high.
2. The Fed intends to delay rate cuts until inflation consistently approaches the two per cent target.
3. Acknowledgment of limited progress on inflation, coupled with uncertainty in the economic outlook.
4. Plans to slow down the pace of balance-sheet runoff starting in June.

The Fed’s statement underscores its commitment to monitor economic indicators and adjust monetary policy as necessary to achieve its goals. Following the announcement, gold prices surged over one per cent, with spot gold reaching $2,323.38 per ounce. US gold futures settled 0.4 per cent higher at $2,311 as the dollar weakened by 0.3 per cent, driving down US Treasury yields.