US Fed keeps interest rate unchanged between 5.25% - 5.5%, highest in 23 years

By Ovunc Kutlu

ISTANBUL (AA) - As widely expected, the US Federal Reserve on Wednesday kept its federal funds rate unchanged, in the 5.25%-5.5% target range – the highest level in nearly a quarter-century.

"Recent indicators suggest that economic activity has been expanding at a solid pace," it said in a statement at the end of its first two-day meeting in 2024. That statement replaced what it said in its Dec. 13 statement, namely that "economic activity has slowed from its strong pace in the third quarter."

The Federal Open Market Committee (FOMC) also added to the latest statement: "The Committee judges that the risks to achieving its employment and inflation goals are moving into better balance. The economic outlook is uncertain, and the Committee remains highly attentive to inflation risks."

The committee, however, gave no hints about when it will begin to lower interest rates this year.

"In considering any adjustments to the target range for the federal funds rate, the Committee will carefully assess incoming data, the evolving outlook, and the balance of risks. The Committee does not expect it will be appropriate to reduce the target range until it has gained greater confidence that inflation is moving sustainably toward 2 percent," the statement said.

The decision to keep rates unchanged was unanimous, with all 12 committee members voting in favor of the move.

The Fed skipped interest rate increases four times during 2023 – June, September, November and December – after making a last rate hike of 25 basis points on July 26.

Over the course of 11 meetings from March 2022 to July 2023, the central bank raised rates by a total of 525 basis points to fight record inflation, which in the summer of 2022 rose to its highest point in more than 40 years.

After soaring to 9.1% in June 2022, annual consumer inflation significantly dropped to 3% in June 2023, but climbed to 3.7% in August before slowing down again to 3.4% in December.