Federal Reserve holds interest rates steady, signals cautious approach amid economic uncertainties

The Central Bank of the United States (the Federal Reserve) has left interest rates in the USA unchanged, remaining at their highest level since 2007. This decision matched market expectations and achieved unanimous agreement. The Polish złoty has already shown a response.

To achieve its goals, the Committee maintained the target range for the federal funds rate at 5.25% to 5.5%. In considering any adjustments to the target range, the Committee will closely examine incoming data, changing economic forecasts, and the balance of risks, as announced following Wednesday's meeting.

The statement highlighted that there would be no interest rate cuts until the Federal Open Market Committee (the American equivalent of the Monetary Policy Council) is more confident that inflation is on a consistent path towards 2%. The March CPI inflation reading in the USA was 3.5% on an annual basis, marking an increase from 3.2%

The Committee will continue reducing the portfolio of Treasury securities, debt securities of agencies, and agency mortgage-backed securities.

The Fed pointed out that the economic outlook for the USA is still uncertain. The Committee assesses the risks to achieving its employment and inflation objectives, which have diminished over the past year. The uncertain economic outlook, so the Committee pays close attention to inflation risks.

In the statement, the American Central Bank announced that it would slow down the pace of its balance sheet reduction starting in June.

Starting in June, the Committee will decelerate the pace of the portfolio reduction, lowering the monthly limit of Treasury securities purchases from $60 billion (£49 billion) to $25 billion (£20 billion). The Committee will maintain the monthly limit of agency mortgage-backed securities purchases at $35 billion (£28 billion), and any principal payments exceeding this limit will be reinvested in Treasury securities.