Federal Reserve takes a break and decides not to raise interest rates in the US.

The US Federal Reserve (Fed, central bank) kept its reference interest rates stable this Wednesday at 5-5.25%, in the first pause in its monetary adjustment since March 2022, although it expects new increases between now and the end of the year.

The Fed thus decided to take a break and will not raise interest rates this month, although it did not rule out continuing to raise them in the future if necessary.

Rates thus remain in a range of between 5% and 5.25%, the highest level since mid-2007, after a streak of 10 consecutive increases carried out to lower inflation.

“Keeping the target range stable at this meeting allows the Committee (Federal Open Market) to evaluate additional information and its implications for monetary policy”, the Fed pointed out in a statement in which it warned that despite the pause it is prepared for more increases “if risks arise” that prevent inflation from falling to the 2% target.

It also raised its growth forecast for the world’s largest economy to 1% in 2023 from 0.4% in March, and slightly lowered its inflation forecast to 3.2%, from the previous 3.3%.

In determining the degree of additional policy tightening that may be appropriate to achieve that objective, the Committee will take into account the cumulative tightening of monetary policy, the way in which monetary policy affects economic activity and inflation, and factors economic and financial.

The president of the Fed, Jerome Powell, appears this afternoon to explain this decision, which is known one day after learning that the year-on-year rate of inflation fell considerably in May, 9 tenths, to stand at 4%, its lowest level since March 2021.

It was the second steepest drop in the consumer price index since it started to decline 11 months ago, though the figure is still far from the Fed’s 2% target.

In the statement, the Federal Reserve notes that recent indicators “suggest that economic activity has continued to expand at a moderate pace”, in a scenario in which job creation has been strong in recent months and the unemployment rate has remained low, but inflation “still elevated”.

The Fed acknowledged that tighter credit conditions for households and businesses are likely to weigh on economic activity, hiring and inflation even though “the extent of these effects remains uncertain”.

The American banking system, he added, “it is solid and resistant”.

With information from AFP and EFE