Having raised its key federal funds rate at ten consecutive meetings, the Federal Reserve left rates unchanged at the Federal Open Market Committee’s June meeting.
- The federal funds rate remained at 5% to 5.25%
- Jerome Powell ruled out any cuts this year
- Rates are expected to have risen above 5.5% by the end of the year
Having raised its key federal funds rate at ten consecutive meetings, the Federal Reserve (Fed) left rates unchanged at the Federal Open Market Committee’s (FOMC’s) June meeting. The federal funds rate remained at a range of 5% to 5.25% as policymakers voted unanimously to pause and take time to evaluate the impact on the economy of the tightening measures imposed by the central bank since March 2022.
“Rates are widely expected to resume their upward trajectory as early as next month”
Nevertheless, Fed Chair Jerome Powell said that almost every member of the FOMC “view it as likely that some further rate increases will be appropriate this year”, and rates are widely expected to resume their upward trajectory as early as next month. A median forecast showed that Fed officials expect the federal funds rate to reach 5.6% by the end of the year, compared with March’s consensus forecast of 5.1%, and Chair Powell emphasised that there was no prospect of a rate cut this year. The Fed upgraded its forecast for US economic growth this year from 0.4% to 1%.
The annualised rate of US consumer price inflation continued to slow in May, easing from 4.9% in April to 4%. Nevertheless, inflation remains significantly higher than the Fed’s 2% target and Fed officials raised their forecast for core inflation from 3.6% to 3.9% at their June meeting. Chair Powell warned: “The process of getting inflation back down to 2% has a long way to go” .