The Federal Reserve keeps interest rates stable

In line with expectations, the US Federal Reserve did not change the interest rate and kept it steady in the range of 0-0.25%.

In the Fed’s statement, it was stated that the decision to keep the interest rate on hold was taken unanimously.

Noting that the Federal Open Market Committee aims to achieve the maximum number of job opportunities and the inflation target of 2% in the long term.

It was emphasized that it is expected to maintain the supportive stance of monetary policy until these objectives are achieved.

It was noted in the statement that it was decided to keep the target range for the fed funds rate between 0 and 0.25%.

Noting that the bank purchased assets of at least $80 billion per month in Treasuries, and at least $40 billion per month in mortgage-backed securities each month, starting in December of last year.

This situation “significantly exceeded its objectives of maximizing employment and stabilizing prices”, and it was emphasized that this would continue until progress was made.

It was also emphasized in the statement that the economy has made progress in line with the stated goals since then.

“If the economy continues to develop as expected, the committee may decide to slow the rate of asset purchases soon,” he added.

The statement, which clarified that the committee would be ready to adjust its monetary policy position appropriately in the event that risks arise that may prevent the achievement of its objectives.

He stated that public financial conditions will remain supportive and will continue, but risks to the economic outlook remain.

The statement stressed that asset purchases help the market to function in an orderly and supportive manner, thus supporting the flow of credit to households and businesses.

The Fed also announced its outlook for the economy, lowered its growth forecast and increased inflation expectations and interest rate expectations from 2022.

The Federal Reserve also cut its forecast for US economic growth this year from 7% to 5.9%, while raising inflation expectations from 3.4% to 4.2%.

The average policy rate forecast for Fed members also increased from 0.1% to 0.3% for 2022.

From 0.6% to 1% for 2023, expectations for the long-term average interest rate were held steady at 2.5%.

The US economic growth forecast for next year has also increased from 3.3% to 3.8%, and the 2023 forecast has increased from 2.4% to 2.5%.

The long-term growth forecast for the US economy was 1.8%.

In the statement, which includes estimates of the unemployment rate, the unemployment rate, which was previously expected to be 4.5% in the country this year, was estimated at 4.8%.

With the US Consumer Price Index (CPI) rising 5% y/y in May, the process in which the Federal Reserve will change its monetary policy has begun.

At its June 16 meeting, the Fed directed that upward revision to inflation, interest rate expectations, and efforts to reduce asset purchases may soon begin to be discussed.

At that meeting, average policy rate expectations in 2023 increased from 0.1% to 0.6%, while inflation expectations for 2021 increased from 2.4% to 3.4%.

It has been noted that while Fed officials have begun to give verbal guidance regarding the reduction of asset purchases after June 16, an attempt will be made to communicate this process in a very transparent manner.

Although Powell’s tone was somewhat moderate at the July meeting, the August minutes revealed that members considered it appropriate to reduce their asset purchases before the end of the year.

Powell said at the Jackson Hole Economic Policy Symposium that same week that he believes it would be appropriate to start slowing the pace of asset purchases this year.

The Fed last changed the policy rate by cutting 100 basis points at the meeting on March 15, 2020.