Debate still rages on whether the US economy can have a 'soft landing'
The Federal Reserve announced today that it will keep its federal funds rate between 5.25 and 5.5 per cent, forgoing another interest rate increase after its most recent meeting.
The move was widely expected by analysts and economists, as new data show a US economy with stronger-than-predicted growth. Many still expect at least one more 25 basis point increase to come at some point this year.
Since March of last year the Fed has pursued one of the most aggressive hiking campaigns in its history, mirrored by many other central banks including the Bank of Canada. This campaign has been aimed at taming persistent inflation.
“Recent indicators suggest that economic activity has been expanding at a solid pace,” a press release announcing the decision reads. “Job gains have slowed in recent months but remain strong, and the unemployment rate has remained low. Inflation remains elevated.
“The U.S. banking system is sound and resilient. Tighter credit conditions for households and businesses are likely to weigh on economic activity, hiring, and inflation. The extent of these effects remains uncertain. The Committee remains highly attentive to inflation risks.”
Rate increases tend to take a period of months to be felt in economic data, and while US growth has still exceeded expectations there has been a notable cooling in growth and labour statistics. Other factors such as an increase in the price of crude oil could also weigh on growth.
Inflation remains above the Fed’s 2% target rate, however it has come down over recent months, which plays a role in the Fed’s apparent pause.
